Will Peloton Win in the Post-Pandemic World?

The stay-at-home economy has been a major tailwind for Peloton (PTON -0.98%) as gyms have been shut down or limited in their operations for much of 2020. But what happens when the pandemic is over and people can work out at fitness centers again? In this Fool Live clip from Nov. 17, Fool.com contributor Matt Frankel, CFP, and Industry Focus host Jason Moser discuss whether Peloton's business will stay strong in a post-pandemic world. 

Jason Moser: Yeah, I see a Peloton one here. Let's talk about this first because actually last week's Wildcard Wednesday Industry Focus, I had Rory Carron on from my MyWallSt. It was a fitness-related show and we talked a little bit about Peloton. So Fighter Flash asks, "Peloton is down due to vaccine, a big backlog. Historically, what happens when a company has a backlog but is not able to deliver products?" Down due to the vaccine, I think that's just that knee-jerk reaction we've seen with a lot of folks and saying, "Oh well, whether it's telemedicine or DocuSign (NASDAQ: DOCU) or exercise, the vaccine that news creates that knee-jerk reaction." Now, in regard to a company with a large backlog, but then they're not able to deliver product, that could go a number of different ways.

Matt Frankel: I weigh Peloton in the post-pandemic world, even with the vaccine, I prefer them to a company like Zoom (NASDAQ: ZM), and I'll tell you why. With Zoom, there's no big outlay of capital to use the platform. You buy a subscription, you pay for it each month, you can cancel whenever you want to. Peloton is a subscription product. We pay monthly for our subscription to the service, but we also paid a few thousand dollars to get the bike. People aren't going to spend that much money on a bike and then just not subscribe after the pandemic.

Jason Moser: Sure.

Matt Frankel: I like the big capital outlay factor there as a safety net after the pandemic, because people have already spent a ton of money on a Peloton. They're going to use the service.

Jason Moser: The stock is not down today, it's flat as I'm seeing right now. So maybe that was earlier on when the headline first.

Matt Frankel: They were down significantly last week when the first vaccine stuff was announced.

Jason Moser: Going back to that.

Matt Frankel: They were part of that initial blood bath in the tax base.

Jason Moser: Yeah, I think a lot of were. Again, we talked about that. We all were expecting that. You see some of these stocks that have done really well, but we now agree, as much as you may like the business, a lot of valuations have become a little bit detached from the fundamentals of the business, and that's OK, it's still a good business. I agree with you. I think that for the most part, people are going to want to continue to have that choice. If you've already got the bike, then that's going to influence your choice. Certainly, I think you're going to continue to want to keep that subscription, but yeah, I think it will be interesting to me to see how the company performs post-pandemic. When we get to this point where vaccines have proliferated most of society and we're back to healthy, I just don't know the answer to this, I wonder how many people will say, "I was thinking about getting a Peloton bike, but now that the gyms are back open and things are safe, meh, maybe I won't worry about it." I just don't know.

Matt Frankel: Yeah, we love our Peloton, but I like going to the gym.

Jason Moser: You're talking to a guy here, my version of exercise is getting out and walking the dog and playing 18 holes. Everybody's got a bit of a different perspective on how they get their exercise and whatnot, but it will be interesting to see. A company, if you've got a backlog and you can't fulfill that product, you'll see. A good example is Tesla (NASDAQ: TSLA). You'll see oftentimes they'll put out news of a product, something that is coming and they're taking deposits, whether it's $100 or $1,000 deposits, it's very easy to lay that deposit down for the promise of something where you know it might be a while. Then as time goes on and things drag out and things get postponed, you see refunds and people back out and they just say, "Well, I'll wait." That's always a risk. You may have people that just say, "Well, they can't fulfill my order, maybe I'll go elsewhere and find something else." It gives room for competitors to jump in there and try to take a little bit of share. But Peloton, they've done something really pretty special thus far. It really developed an identity in the space there with not only on the equipment, but the community behind the equipment and the subscription. I think, oftentimes, people are willing to wait if they know what they're getting is really a good product and a really good service.