In this episode of Industry Focus: Wildcard, Jason Moser chats with Rory Carron, head analyst with MyWallSt, about the stay-at-home fitness space. They talk about companies which are leading right now and whether some big-name newcomers will be able to dislodge the incumbents. They talk about the challenges of operating in the space, how different players are distinguishing themselves, future opportunities, what it all means for investors, and more.

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This video was recorded on Nov. 11, 2020.

Jason Moser: It's Wednesday, November 11th. I'm your host Jason Moser, and on this week's Wildcard Wednesday's show we're talking fitness. More specifically, we'll dig into the companies changing the face of fitness in the 21st century and what the future holds even post pandemic. Joining me this week, he's the Head Analyst with MyWallSt, where their aim is to help you own your financial future through investing -- and you can learn more about that at -- it's Mr. Rory Carron. Rory, thanks for joining us.

Rory Carron: Hey, buddy!

Moser: [laughs] How's everything going on your side of the pond?

Carron: Oh, great, great, great. How are things in America, all quiet I assume?

Moser: Oh, no news here. I mean, it's all just, sort of, a status quo, everything is just standing normal. [laughs] Yeah, obviously, a lot of headlines are flowing here this time of year, and it'll be interesting to see how all of this shakes out. But you know, hey, at the end we just hope democracy prevails, and we can all, you know, put one foot in front of the other, right?

Carron: Well, we're all rooting for you.

Moser: Well, I appreciate that. We're rooting for us too. [laughs] Well, I mean, speaking of big headlines and news in store. You know, we're going to steer away from the politics of it all, but this has been a very big news week. Earlier on, obviously, the headline dropped that Pfizer had come up with some very positive vaccine news, and this obviously sent the markets into an interesting direction, right? I mean, we saw a reaction where the word "rotation" started being thrown around more and more as, sort of, these stay-at-home stocks maybe became a little bit more out of favor, some tech, in general, perhaps became a little bit more out of favor. Maybe some more money was flowing into cyclicals that were seen as maybe more of a value play.

But I'm curious to know, I mean, you guys are in Ireland, for our listeners that don't know, but obviously, you follow our markets here with my MyWallSt as well, how are you and the team viewing all of this stuff going on right now in regard to the pandemic, in regard to the vaccine, stay-at-home stocks, what are you guys talking about these days?

Carron: Yeah, I mean, recall that story from, I don't know if you've heard of, Joseph Kennedy, the Kennedy paterfamilias, who was a shoe shine, I started giving him investing advice and he saw that as a sign of, like, mania.

Moser: [laughs] I do recall that, yeah.

Carron: Yeah, do you know that story? Yeah. When my phone starts getting messages from my friends about investing, I know something big is going on, I know mania has hit the markets, and Monday was definitely one of those days, I mean, it was a joyous moment, wasn't it, and I think everyone wants to be really optimistic about it. But, in one way we have the scientists telling us we still need to remain cautious, and then you look at the market, it was like the Age of Aquarius chorus line, [laughs] it was going kind of made. And, yeah, I mean, the news from Pfizer was all positive, but it doesn't look like things are going to end anytime soon, does it? It's going to be a slow progress process.

And I think I saw a survey once that half the population of America don't even want to take a vaccine, which, given how politicized it's been, it's hard to blame them, I suppose.

Moser: Yeah, it feels like, it's a shame there's the political angle to that. I guess there's maybe at least some air of caution there, and folks feeling like, maybe a vaccine that was developed so quickly, is it going to really be safe? I mean, I understand all of those concerns. Hopefully, that's just a survey and it's kind of like, you know, the election polls here, right, I mean, it says one thing, but really in reality it turns out to be something very different. But yeah, it does feel like with all of that good news, it is worth remembering, we still have a ways to go here, and exercising caution is clearly the prudent move.

This all stay-at-home stock phenomena, we'll talk about fitness specifically here in just a few minutes, but looking from a little bit of a higher view, a bigger picture beyond just fitness, we've seen a lot of really good businesses that have -- they benefited from the tailwinds this year of this move toward more digitization, move toward this digital economy. But the selling that we've seen here over the past few days in some of these plainly very good businesses, I mean, I'm looking at everything from Wayfair, to Etsy, to Teladoc Health, I mean, you know, insert name of SaaS company here, right. I mean, what we try to explain to our listeners and our members, it certainly is not a condemnation of the business, it's simply the psychology of the market, it seems, on any given day, which is tough to predict?

Carron: I mean, like, the really great news that came on Monday was that no one is ever going to have to shop online again. [laughs] Because we all hate doing that.

Moser: Yeah, because we all want to drive to the store.

Carron: Yeah. I mean, never mind that e-commerce penetration basically, kind of, jumped 10 years ahead of the trendline over the last six months. Last I clocked it, it was something like 36% in the U.S., up from 16% pre-lockdown. And yeah, of course, the next few months you're going to see the streets of New York, Chicago, L.A. are just going to be strewn with abandoned Peloton bikes, because you know, in post-COVID world no one is going to want to work at home anymore. [laughs]

Moser: We're all sick of it. [laughs]

Carron: Oh, yeah. Jokes aside, look, of course a lot of these businesses got a huge boost from the pandemic and from the fact that we were all stuck at home and we didn't know how long we were going to be stuck at home. And some of the valuations, you know, we're getting quite ahead of themselves. And this is just a, kind of, reset a little bit, you know, I think it's nothing to be too worried about, they're still great businesses.

And on that penetration, when you think about how many people have now signed on to things like Etsy, and signed on to things like Amazon (NASDAQ:AMZN) and Wayfair and put in all their credit card details and organized all their shipping information, that's just not going away, that's going to remain, that's a habit-forming moment, and I think they're going to benefit long-term out of this totally.

Moser: I think you're right, I think it's accelerated a lot of habits. And folks who maybe were on the fence before, you know, this sort of helped them make that decision, which I think ultimately is a good thing, and I don't know that we'll see that changing anytime soon.

Let's talk about fitness specifically, because fitness has come a long way in a very short period of time. Technology has not only given us more ways to stay active, but more ways to keep track, and that really, I think, encourages people even to stay more active. Once you -- something that you can measure, it becomes more clear the benefits. And clearly, more people are getting it done at home these days. So, where do you see the future for connected fitness versus the gym? Do you feel like the gym is going the way of the movie theater?

Carron: Yeah. Like, my first experience of connected fitness was Nike+ (NYSE:NKE), I don't know if you remember that, it was like, you bought a special sneaker that had a little pocket and you put a USB-sized key into it, and it kind of measures your steps and all that kind of stuff. That was kind of my first experience of it. And then, we had a few years where there was kind of a big movement in it, but it still felt really analog, you know? You had MapMyRun, you had those heart monitors you could buy, and MyFitnessPal, and even the early fitness trackers, it kind of seemed very much like digital fitness, but not necessarily connected fitness, because so much of fitness comes down to motivation. A computer program telling you to walk and exercise 1,000 steps, it's a useful knowledge but it's really nothing compared to being motivated by a human who's using humor and empathy to get you over the last mile. And that experience makes you feel part of a group, makes you feel part of something more.

And one of the things I loathe about connected fitness, as we have it now, is that it totally flips the old gym model on its head. The most profitable gym members are the ones that never show up, and that's actually most gym members, I think the average is, like, 82% of gym members don't go regularly, whereas connected fitness, because of the subscription model, it's all about engaging people in fitness, you know, the more engaged you are, the more likely you're going to continue paying for that subscription. And, you know, I saw a survey from TD Ameritrade, this was back in July, where it said, 59% of Americans didn't plan to renew their gym membership after COVID. And look, that's not all going to connected fitness. I don't know about you, but I have been spending an awful lot more time outdoors since the pandemic hit, you know, I've gone for walks, gone for swims. But a lot of places, you just can't do that, you know, it's going to be hard in New York and Chicago, [laughs] in the next couple of months, I know you guys are having, kind of, Indian Summer there at the moment, but when it gets cold, those opportunities aren't there for people.

And the numbers are all heading in the right direction for this business. It's kind of following the gaming industry slightly as well. You know, gaming is going in, kind of, a 2.0 where now there's a lot more of social media, you know, social media has an awful lot of, for all its negative effects, it kind of has positive aspects as well. And there's definitely a kind of support network being created around these connected fitness devices, an awful lot of positivity in the, kind of, connected fitness groups that are coming up on Facebook. And I think things have changed quite a lot in terms of fitness is not so much about getting a six-pack anymore, it's about being healthy, feeling energized, wanting to be out there. And things on Instagram, where people are going out and hiking and cycling and just being outdoors more and being more active more, I think is a positive over the long run.

And, like, the old gym equipment that used to get the reputation of the laundry rack, you know, and I definitely had some as well. I had the barbells back when I was a teenager, and they definitely worked as a cloths horse for quite a while. But these new offerings are like, they're providing so much more, you know, there's fitness training, there's social interaction, there's a gamification to the whole thing. And it really is all about engagement, and I think when you look at the companies, you're seeing some crazy engagement numbers coming out.

Moser: Yeah. You know, I'm glad you mentioned that difference between device and community, because I think that's where a lot of the advantage does lie. I mean, like, I don't own a Fitbit (NYSE:FIT) or an Apple Watch (NASDAQ:AAPL) or anything like that. I feel like if I had one on my wrist and it was buzzing, telling me to get up and walk, a couple of times of that and I think I'm throwing that thing in the trash, like, I just don't want to sit there and be bothered, right. I'm connected enough as it is [laughs] with my phone.

But the difference there, I think, you know, when you're a part of the community, there's something else there, right? I mean, there's a kinship there. And I think that leads us into -- you know, we wanted to talk about Peloton today, because I think Peloton is one of the companies that's really exploiting this idea that community can help motivate people to stay more fit, or to exercise, or to incorporate at least some sense of fitness into their lifestyle that maybe they didn't have before. And I'll be the first to say, when Peloton went public, I mean, I don't want to say -- I guess, I was skeptical. I mean, I wasn't necessarily bullish or bearish, I was just kind of maybe on the fence with it thinking, hmm... I just don't know how big of an opportunity that is. But clearly, they're doing something right. Their latest quarterly result seemed like a little bit of a mixed bag, but I would say positive overall. And it sounds like they just inked a very interesting new partnership as well. So, what's your impression of how Peloton is doing these days?

Carron: Yeah, Peloton is a company I have liked for an awful long time, like, way pre-IPO, I don't know what I saw in that business, but I saw something in that business where I just thought this is going to be a great business going forward. And one of the things I always loved about it was that people got so stuck on the pricing. And I think that's when -- it's become one of my, kind of, new, novel bullish signals, whenever you hear someone say, no one is going to pay that much for that. [laughs] You know, how many times have we heard that, and then seen the iPhone be a huge success [laughs] or the numerous other examples. And the pricing is a thing, but it just takes a calculator to break down that it's actually not that expensive. If you were to take the bike and the subscription and talk about the installments that they give, I think it works out something like $100/month or something like that. And if you're using it, if you're getting the engagement that they're getting, which is like, people using it 20 times a month, that's like $5/session. SoulCycle is charging, like, $35/session in New York. So, the pricing argument, I think, falls down quite a bit.

But what I really like about it is the use of the scale. Like, one of their trainers is a girl called Robin Arzon. She has 600,000 followers on Instagram. She's their big star. And as you just said, they just announced Beyonce has signed a multiyear deal with them. I haven't verified this, but I just saw on Twitter, 104,000 people joined for the first fitness class that she hosted, it just happened this morning --

Moser: [laughs] Good Lord! Wow!

Carron: Yeah. No other gym is ever going to be able to offer that, you know, this is harnessing the internet to make the impossible possible through scale. And that's because they're able to amortize those costs over the 1.3 million subscribers they have. And there's a lot of similarities to Netflix, I feel, you know, we think about Netflix, why is Netflix potentially going to win the streaming war? Because their cost per subscriber is so much lower. You know, they can pay out the big bucks. And that's what Peloton has now. Peloton has the scale where they can offer the absolute best experience.

And similar to Netflix; Netflix was never really about the shows, was it, it was about control, you know, it was about having that control over your life. And when you think about the Founder story of Peloton, it was built for control as well, you know, the Founder just had two kids, he was working very hard, he gotten into the SoulCycle thing and he wanted to be able to maintain that and being able to bring it into the home and control when you do it. You know, that's such a powerful thing for people.

And it's proven out, JPMorgan estimated that they would hit 3.6 million connected fitness subs by 2024. They're estimating 2.2 million just this year. This thing is growing like wildfire, and obviously, COVID has had a big impact on it, you know, their revenue grew 232% in the last quarter; [laughs] that's not normally what you see, these are strange times. But the engagement figures are still so high, they're getting 20.7 monthly workouts per subscriber. And that means that people are going back to these things day after day, they're not becoming the cloths horse that we think of when we think of home gym equipment. And they've got sky-high retention rates; you know, 92% retention. And it's really becoming a platform.

I think the focus on the pricing is the hardware argument, and they still are very much a hardware business. You know, don't get me wrong, but it's that recurring revenue that's coming down the end line, when those cohorts are building year after year, that's going to be really important, that's going to build that platform. And they can do so much more with that, you know, they've got into apparel, there's many more avenues they can go down with rowers, and I think they're really going to become, kind of, like, I hate to use the term "Apple" or "Amazon" of anything, but I think in terms of branding, they're definitely going to become kind of the Apple of fitness.

Moser: It feels that way, doesn't it? I mean, it's really worth remembering that this is a story that's still so young, I mean, they're so early in their development. And you know, one of those things that we look for in great investments is optionality, the chance to do more with what you've got, and they've done such a good job of building that brand. The brand awareness for Peloton, you know, it's top of mind I think, for anybody who really thinks fitness these days. And so, yeah, I mean I certainly can understand concerns maybe that the hardware, you know, the exercise equipment, is expensive. But again, you look at that over the longer stretch of time, that doesn't necessarily mean it's always going to be that way. And if you don't think that they're going to be developing new equipment, different types of equipment, then I would say I would disagree with that, I think that's clearly what they're going to do. And fitness can go so many ways.

And then to your point, the retention rates are just, those are really phenomenal, I think a lot of that has to do with the commitment that you make when you buy the equipment. And then also, we know that acquiring customers is expensive work. And when you've acquired that level of subscriber base and you have that type of retention rate, it's just that much more difficult for competition to come in there and encroach, it's that much more difficult for competition to come in there and really take that share from you. So, it really does feel like Peloton -- there's just a lot of good things they're doing.

Now, on the flip side of that, you mentioned Apple, and so, you know, we have to talk about Apple, this is clearly the elephant in the room in regard to virtually anything these days. You know, recently Apple held their event, the event that they held, you know, sans the iPhone, right, the event that they excluded the iPhone from, they talked about all these different offerings and Apple One, I guess it was that platform. But part of that is a fitness offering.

And I'll be the first to say that a company, just because they're huge and they have all of the resources in the world, that doesn't mean they can automatically just go in there and win. We see plenty of examples where large, well-capitalized competitors try to get into a particular market and it's a lot more difficult than they thought. But what do you think about Apple's fitness offering and what is their opportunity in the space?

Carron: Yeah. So, I called the Peloton the Apple of fitness about a week before that event. [laughs] And my Twitter feed was just flooded with people going, I think someone else wants to be the Apple of fitness. [laughs]

Moser: Right. Well, but I mean, I think it's going to be far more difficult for Apple to actually be able to compete with Peloton. I think that just because it's Apple, doesn't mean they're going to win. I don't think they can get in there and just do it.

Carron: Yeah. And I heard the term Peloton-killer used plenty of times. And actually, there's a concept I stole from David Gardner, you might remember this one. And he wrote a great piece about, when Amazon launched Handmade Amazon, [Amazon Handmade] (sic) I think, and the USA Today actually called it an Etsy-killer, and the stock dropped, it was destroyed, it went down, like, 75% over the course of the year. And so, I always like to see that, I always love to see a headline, anything along, in kind of the template of a big company launching a small company killer; that's a great bullish signal to me. Now, I really loved that piece by David all those years ago, I kept it.

But, yeah, because what it signals is that the smaller company is on to something great, right? Apple has looked at Peloton and gone, hold on! Why aren't we in that business? [laughs] Now, my immediate response to Fitness+ was that, in my opinion it's not really a serious competitor to Peloton. You know, there's a little bit of crossover with Peloton's digital app, but the Fitness+ doesn't provide live classes, you know? Essentially what they've done is they've branded the, kind of, free workout videos that you find on YouTube, and charge you for them. [laughs]

Moser: Well, that was my impression. To me, it seemed like, it was just, you know, YouTube with an Apple brand stamped on it.

Carron: Yeah. Look, there's a very limited crossover between the Fitness+ and Peloton's Connected Fitness subscription, definitely. Because you know what people are paying for there, is the integration with their in-home devices. They're paying for the live instruction. And they are paying for that vast network of like minded enthusiasts. But you know, what I will say about Fitness+ now is, since September 2015, Apple's revenue has increased by somewhere around 17%, 20%, however Apple's market cap has almost quadrupled in that same time period.

And how did that happen? Well, back in 2015, they were getting a price-to-earnings multiple of 11, today it's something like 35, and the way they've done that, is they've done something brilliant. You know, the most accretive thing a company can do today is move from a transactional revenue model to a recurring revenue model. That exploits this fundamental flaw in a human's mind, which is that inability to register time, you know. And so, Apple's greatest innovation in 10 years hasn't been launching new products, it's been growing that recurring revenue from what was really low single-digits to now 23% of its recurring revenue. So, that's where Fitness+ comes in, and that's why I think they're doing that. And it's probably going to be a worker for them.

But it is surprising, quite frankly, to hear Apple bulls make the argument that Apple is going to win, because they have the just good enough products, [laughs] you know, Apple doesn't want that, Apple wants to be the Peloton, now that's what they want. And so, I'm surprised they didn't buy them earlier. You know, I've said that about Apple so many times before, there's so many times you look at a business and you go, why didn't Apple just buy that? And I'm sure they've got, kind of, some grander plan down the line, but I think Peloton is pretty safe against Apple's fitness offering at the moment.

Moser: Yeah, I tend to agree. I think, you know, for all of the efforts that they could potentially make in that space, to me, it really does seem like it's just meant to be almost. The bigger story to me is Apple One, it's not Fitness+. I mean, Fitness+ along with, like, Apple News and Apple Music, they come along with all of these little services, and that way, they can take these services and lump them into a value-sized offering where they can really focus on getting that recurring revenue, that subscription, which could come at a reasonable price, stuff that scales really well, they don't have to put terribly too much thought into it, and it gives them that recurring revenue stream. You know, it doesn't require so much attention, right? I mean, they're not doing the same thing that Peloton is doing. You know, call me when Apple is actually selling equipment and building a community like Peloton is building, then it feels like maybe you're talking about a true competitor, that's why I've always felt like Apple Fitness+ is just going to be one more little offering in that overall subscription, in their goal to really try to build out that recurring revenue.

And so, you know what I mean, it probably does OK, I mean, there are plenty of Apple folks out there that'll subscribe to it, I'm sure. But I don't think it makes as meaningful an impact to the exercise, to the fitness community as something like Peloton does.

Carron: No, it's all about the bundle, isn't it? I believe it was what the CEO of Netscape said, business is all about bundling and unbundling. [laughs]

Moser: [laughs] Yeah. Well, it's so funny -- like, we're watching the whole, you know, the video streaming, I mean, that's a great example there. For so long, we were raised on this bundle with cable, and then Netflix came along with the internet and all of a sudden, the bundle is bad and you can just get everything you want on Netflix. Now, all of a sudden, you got all of these competitors, and if you want to watch all of the shows that you like the most, you have to have multiple services, so then it starts to become a little bit more like the bundle again. So, it's funny to watch it come and go.

But I don't know that there's ever one distinct direction it goes, it really is all about just the consumer and finding what the consumer wants. And yeah, I tend to think that when you have a company like Peloton that's devoted toward one specific thing and doing it really well, you know, you don't want to just sit there and say, oh, well, because Apple is bigger and has all of these resources, they're going to be able to displace the smaller incumbent, just because they have all of the resources, it's far more evolved than that.

Carron: Yeah, absolutely. "Goal dilution" look it up, [laughs] it's a great theory that you can always [...] the big company take over the small company arguments. [laughs]

Moser: I love that. Well, let's talk about another company that's gotten a lot bigger here over the past several years. I mean, this is a company, to me, I'm just really impressed over the last several years, it's Lululemon (NASDAQ:LULU). And when you look at what Lululemon has been through, I mean, leadership issues; questions regarding growth; expensive products, will consumers really buy it; limited market opportunity perhaps. Listen, this company has responded on virtually every front, and over the last five years, the stock is up over 550%. I mean, it appears now that they too are finding a way into this connected fitness opportunity.

Carron: Yeah, man! I mean, when I started on MyWallSt, we had three sports apparel companies in the showroom. And I think you can probably guess what they were, Nike, Under Armour, and Lululemon, they were picked by our CEO, Emmet, who used to write for you guys, I think, all those years ago. I mean, I had never even heard of Lululemon back then. If you told me that this kind of niche, Canadian yoga-maker was going to be the big winner out of those three, yeah, I'd laugh at you, I really would have, you know. [laughs]

Moser: We were all kind of chuckling at that one, none of us, I think, really bought into it.

Carron: And like you said, it's amazing what they've been able [laughs] to accomplish with no management team. This is like one of those businesses that just runs itself it seems. But, yeah, I mean the surprising thing with Lululemon, I suppose -- and when I first looked at it, it just looked like it was just one of those apparel companies, horizontally integrated, was probably going to get bullied, like, by Nike, or by Under Armour, or adidas, you know, any other apparel companies, because it's just make yoga gear. If people want yoga gear, we'll make yoga gear, no problem. But what we found is Lululemon is so much more, it's a vertically integrated business. They control absolutely everything from the fabrics they use, they make their own fabrics, all the way down to the in-shop experience.

And so, we saw, back when the sports apparel wholesalers or retailers were getting shut out, and was it 2017 when Sports Authority closed. Nike was getting hammered, adidas was getting hammered, Under Armour was getting hammered. Lululemon didn't even blink, they were just fine. They had the direct consumer business, they had their stores, they had their concessions here-and-there, but really, they controlled the entire customer journey. And that's why I think this company is doing so well, you know, and they've built themselves out as a real lifestyle brand.

And yeah, they made a very interesting recent acquisition, a company called Mirror, which is, as you'd expect, just a mirror. It's a mirror that you hang up on your wall and you push a button and suddenly it's a kind of portal where you can interact with an instructor and he'll check your form and you can get into interactive classes, similar to that of Peloton. And kind of what I liked -- my instant reaction to this was like, what's holding back all those rich New Yorkers in their apartments from getting a Peloton? Its space, isn't it, you know, [laughs] like, that's the main thing. A lot of people can't keep these big bikes or big treadmills in their apartments, because it's so cramped.

So, I really like this idea, this idea of just putting something that would be hanging on your wall anyway, and then turning it into a digital portal to do this kind of stuff. I mean, they paid $500 million for it, that sounds like a lot of money for a company that's only been around for two years, I think. But this company makes money, you know, they surpassed a $100 million in revenue by the end of this year.

And they've got a similar offering to Peloton. You know, it's a big upfront cost, the thing is $1,500 to buy the device or $42/month. And then it's something like $600/year for, kind of, the premium subscription package. But what I, kind of, like about the Lululemon connection with it, is that it's, like I said, it's more than just a piece of workout equipment, you know, it's a portal. And for a company that's so obsessed with being directly tied to its customers, this is great. You know, this is Amazon Alexa of connected fitness, this is getting inside the home.

And the Founder of Mirror had a different idea than Peloton did. He kind of saw it as a platform more than anything else, he kind of thought that other companies would be able to come in and offer it, so other brands, you know, CorePower Yoga or Pure Barre would be able to come in and they would be able to offer classes through this device.

And I'm not entirely sure which way Lululemon is going to go with that, I don't know whether they want to, like, as a company [...] control everything so much, I don't know. But I think they probably like to bring all that stuff in-house, but moreover now, they've got a place to sell direct to their user, that end sell. People would be able to buy stuff through this thing, and that's why I think it's a really interesting acquisition for them. It's not going to make a dent in their revenue for quite a while, I suspect, but it's all about continuing that direct-to-consumer journey that they've been on for so many years.

And, yeah, really interesting purchase, really excited about the ambition of that business in terms of expanding itself through new opportunities. And then getting here at a time when connected fitness is all the rage. They have competitors to that Mirror product, it's someone called Tonal, that I see advertised a lot, and they've raised a lot of money recently. But I think it's not a zero-sum game here. I think a lot of people are looking at these devices now and thinking, we need to get one of those things, whichever one it is, we need something in the home that's going to keep us fit and healthy.

Moser: Yeah. And it extends the relationship. I like the idea, I thought about this as just the -- you know, I run the Augmented Reality and Beyond service here, that focuses on immersive technology, and the first thing I thought, when I saw this acquisition, I was like -- I mean, immediately I can see someone exercising with Mirror and then shopping, right? All it takes is just a little augmented reality technology to let people try that Lululemon gear on in Mirror.

So, you're in your house, your home, and I mean you can try things on, you can see what they look like, you can see what it looks like on you, I mean you can make those purchases, like you said, it's a portal to something far more than just exercise, it's commerce, it's exercise, I mean, it's a long-lasting relationship, there's certainly a lot of potential there with that. I think it was a good accusation.

Carron: Think even broader, man! Think about, like, the instructor saying, you know what, whoever puts in the best effort today gets Lululemon vouchers, how about that? This is the opportunity that you have when you get inside the home. Amazon knows it, they've been working on this Alexa stuff for quite a while, they know what they're doing, and Lululemon is going, [laughs] you know what, we could be in the home too. And I think this is how they're getting in there.

Moser: And I think that's going to work out well. Now, let's wrap up the discussion today, we don't have to get too terribly in depth with this one, but I did want to get your take on Google [Alphabet] and Fitbit, because you know, back in 2019, November of 2019, Google announced it was going to acquire Fitbit. Now, Fitbit, obviously a business that had a lot of potential when they went public, you could see what they were trying to do. You know, it didn't work out quite so well for them, they had a lot of challenges, it's difficult being in hardware, you have to come up with that software to really create the relationship. And we've seen other businesses that have succeeded where Fitbit fell short.

Maybe this Google acquisition helps in that regard, right? Maybe it helps them scale that fitness platform, I don't know yet. But to me, the interesting part is, the deal was announced in November 2019. Here we are today, the deal still hasn't closed, and regulators have now pushed the date back to January 2021. I mean, what do you think the chances are that this deal actually doesn't happen at this point?

Carron: I think there's a chance, [laughs] I definitely think there's a chance ...

Moser: They're all on the radar now, I mean, it's ...

Carron: Yeah, they are, aren't they? You know, it's one of those things where you think about Google buying a business, what is it, $2.5 billion, it seems such a small fry, but then the whole point of these antitrust hearings was looking at those smaller acquisitions, wasn't it? It was looking at, you know, buying Android for a couple of hundred million, now look what it is? Buying YouTube for a $1 billion, now look where that is. So, it was all about going backwards and saying, where did we make the mistakes in the past, and are we making them again right now?

So, yeah, I think there's a good chance it doesn't go through. And you know what, to be honest, when I saw that purchase price, as much as Fitbit had its problems, I do think they were getting it for a steal, that seemed like a very low price to be paying for a company that has -- you see Fitbits everywhere, I've got a Fitbit, I really like it. I will say that they've had challenges with the software, challenges with the platform. You know, I remember, I bought a new one recently and they gave me, I think it was three months free of a Fitbit Premium. And three months later, I got an email saying my trial was over, [laughs] and I went, what? I was on Fitbit Premium. I think I looked at it once or twice, but it just wasn't anywhere near what you were getting from the other big players.

So, yeah, we talked about Fitness+, you know, Fitness+ is probably going to impact Fitbit more than it's going to impact Peloton. But yeah, we'll see how that one works out. I still think it's amazing, we talk about connected fitness where we've come, you know, the fact that we have all internet connections, the fact that we have fitness trackers, the fact that we have a pedometer in our pocket, every single one of us now, that's the kind of infrastructure that we needed to make this stuff, kind of, really available to everyone. And it's just a really exciting space, I think. I think it's going to be one of the most exciting industries. Peloton is kind of defining new category now, but it's going to be one of the most interesting places to watch over the next couple of years, especially with COVID, depending on whether COVID continues or whether it's over, I still think there are some great businesses out there, and great products for people to own and to try.

Moser: Well, remember, you can always reach out to us on Twitter @MFIndustryFocus, you can drop us an email at Make sure to follow MyWallSt and Rory on Twitter. That's @MyWallStHQ, and @RoryCarron.

Rory, I think that's going to do it for us this week, thanks so much for taking the time to join us. I look forward to having you back on the show here real soon.

Carron: Anytime, my friend, anytime, anytime, anytime. Always a pleasure.

Moser: All right. But all the best to everybody there in Ireland.

As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear.

Thanks, as always, to Tim Sparks for putting the show together for us. For Rory Carron, I'm Jason Moser, thanks for listening and we'll see you next week.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.