Peloton Interactive (PTON -2.24%), the $47 billion fitness disruptor, has been on an absolute tear this year. The company's products continue to experience incredible demand amid the workout-at-home trend, and as a result, investors have fallen in love with the stock.
Let's take a look at three charts to gain a better understanding of the business.
Image source: Peloton Interactive.
The stock keeps going up
The onset of the coronavirus pandemic and ensuing stay-at-home orders provided the perfect tailwind for Peloton, as fitness enthusiasts searched for alternate workout options when gyms were closed.
Investors seem to be infatuated with the company, not least because of its early title as the "Apple of fitness." While I'm not necessarily a fan of comparisons like these, it makes sense in this case. Both companies possess very strong brands and sell expensive hardware that is differentiated by its own proprietary software.
Another sign of the bullish tone for Peloton centers on the reaction of the company's announced acquisition of fitness equipment maker Precor. Peloton's stock jumped 14% on the news. Usually, the buyer's stock dips on any takeover chatter, but not in this case. This is an opportunity for Peloton to enter the commercial market, while also bolstering its existing manufacturing capacity.
Thinking longer term, co-founder John Foley says his business can one day reach 100 million subscribers. Compared to the 3.6 million total members the company currently has, this is quite an ambitious goal. Whether this ends up happening is anybody's guess, but Peloton shareholders are certainly buying into the hype.
Soaring revenue
Peloton now has 1.3 million connected fitness subscriptions, which can be shared with up to five members in the same household. These customers purchased a piece of equipment and pay a $39 monthly fee. This metric grew 137% in the first quarter of 2021 compared to last year, and it's the primary reason why Peloton's sales keep soaring.
PTON Revenue (Quarterly) data by YCharts
Revenue in the latest quarter grew 232% to reach $757.9 million, and the company expects this figure to hit $1 billion in the next quarter. Growing this fast is easy when customers are so fanatical about your bikes and treadmills that the business has a net promoter score (NPS) of 94. Such an exceptional rating demonstrates customers' willingness to recommend the product to others, with a score over 70 considered to be top-tier.
Peloton's focus on improving its workout library and music catalog does a wonderful job at keeping users engaged. The recent partnership with Beyonce is an example of how the company is inking deals with celebrities to bolster its offering. It's working, as connected fitness subscribers averaged 20.7 workouts per month during the latest quarter compared to 11.7 in the year-ago period.
Capturing value
The consumer discretionary company's gross profit margin is a clear indication of just how premium its products are. In the most recent quarter, the gross margin was 43.4%. This can only happen if customers perceive the products being sold as truly differentiated from competitors.
PTON Gross Profit Margin (Quarterly) data by YCharts
With the introduction of lower prices for the Bike and Tread, Peloton's aim to appeal to a broader audience will place pressure on the gross margin. The plus side is that the subscription gross margin of 58.5% is much higher than it is for hardware. So, as more revenue over time is generated from these monthly fees, Peloton's overall gross margin will get a lift.
Peloton's ability to capture a great deal of value from users has translated to fantastic returns for stockholders. Hopefully these three charts give readers a solid understanding of Peloton's recent success, as well as a glimpse of the future.
As long as it keeps the customer at the center of its strategy, Peloton will be just fine.
