Please ensure Javascript is enabled for purposes of website accessibility

Better Buy: Disney vs. Peloton

By Parkev Tatevosian - Jan 15, 2021 at 11:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Which is the winner: the entertainment giant or the fast-growing home fitness provider?

Disney (DIS -2.00%) and Peloton (PTON -2.46%) are at two very different phases in their lifecycles. Disney, for several decades, has delighted families around the world with its products and services. Meanwhile, Peloton is a relatively young company. However, it's gaining popularity rapidly as the coronavirus pandemic has led many individuals to seek out exercising options that do not require going to crowded gyms. 

To decide between the two very different businesses, let's dive deeper into their prospects and then determine which is the better pick for you. 

A woman on an exercise bike

Image source: Getty images.

Peloton  

Sales have been surging for Peloton since even before the onset of the pandemic. In fact, wait times for delivery of one of its bikes can be almost two months. Peloton announced the $420 million acquisition of Precor, a large global fitness equipment provider, in part to reduce the backlog of orders and increase its production capabilities.

The big question for Peloton will be how consumers will react once the fear of contracting the COVID-19 disease is substantially reduced. To that end, potential investors can be assuaged that overall revenue for Peloton has been growing by over 100% six years in a row.

Long term it has the potential to disrupt brick-and-mortar gyms the way Amazon disrupted local and national bookstores. It's certainly more convenient to have your exercise bike in your home. Some may even realize they are exercising more often simply because of the convenience. Think rainy days, car trouble, or time constraints. My gym in the Los Angeles area is just four miles away, but it often takes 20 minutes to drive to. What's more, looking for parking can be an adventure in itself.

The customer value proposition is appealing, but Peloton may need to work on bringing costs down to reach the wider audience required for disrupting the industry. Its lower-priced exercise bike is $1,895. The good news for investors is that the acquisition of Precor has the potential to reduce its per-unit production costs, which could give it the potential to lower prices further for customers.

A fireworks display at a Disney theme park

Image source: Getty images.

Disney  

Disney's future is less uncertain. When the pandemic fades away, people are likely to return to experience Disney's products and services. For the House of Mouse, the question is more about when instead of if. 

Some evidence of this can be seen in Disney's streaming services (Disney+, Hulu, ESPN+). People are hesitant or unable to go to movie theaters to watch its movies during the pandemic, but they are by the millions consuming Disney content in the safety of their homes. Disney+ alone has over 86 million subscribers. That's 44% of Netflix's 195 million total, and Disney+ has been in service for less than 18 months.

Further, park reservations and hotel bookings are trending positively at Walt Disney World in Florida, despite surging coronavirus cases. With people having been inside for so long, there may be significant pent-up demand for visits to Disney theme parks. 

Given that vaccinations against the coronavirus are underway, it will not be surprising if Disney is firing on all cylinders by the time the holiday season rolls around. 

The verdict 

While both Peloton and Disney are incredible companies, if you had to pick one of these consumer goods stocks, it should be Disney. Peloton still has more to prove, and given that it's trading at a forward price-to-sales ratio of 8.4, its shares are not cheap. Meanwhile, Disney is a proven winner with a long history of growing revenue and profits for shareholders. And it's trading at less than half of the forward price-to-sales ratio of Peloton. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Peloton Interactive, Inc. Stock Quote
Peloton Interactive, Inc.
PTON
$15.48 (-2.46%) $0.39
The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$105.18 (-2.00%) $-2.15

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
345%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.