Disney (NYSE:DIS) and Peloton (NASDAQ:PTON) 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.
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.
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.
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.