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Why Peloton's Bikes Won't Become $2,000 Clothes Hangers

By Brian Withers - Feb 27, 2021 at 6:54AM

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Hint: It's taking a page out of Apple's playbook.

It's the question on every Peloton (PTON -1.49%) investor's mind. Is the bike just a fad? Will it become an expensive piece of furniture that no one uses after a few months? Motley Fool analyst Tim Beyers and Fool contributor Brian Withers take on this question on an episode of Fool Live recorded on Feb. 8. You just might be surprised at why they think this home exercise equipment specialist has staying power.

Tim Beyers: [Reading a viewer's question] "I just cannot get it. This is Lee Adams. [I can't] get it out of my head that six to eight months, the bike treadmill is a $2,000 clothes hanger." Here is the thing that I want you to think about Lee, if that were true, you wouldn't see the backlog you're seeing, also I think this does happen. I don't think you're wrong, but instead of it becoming a clothes hanger, what happens is it goes on Craigslist and then it moves to somebody like the Fool I know who picked up a used Peloton and started picking up that Connected Fitness subscription.

This is not the same thing as the spinning bike you bought that has nothing connected to it. It's just not the same thing. That does become a clothes hanger because it's connected to nothing else. In Peloton's case, it's resalable because it's connected to Peloton and there may be somebody who wants a Peloton subscription.

This is where Marie comes in here, your comment is, you own the bike, but some people who can't afford the buyers have been buying a cheaper bike and paying the app for the experience. Right. What that tells me is that this is an aspirational brand. Like Apple, it is an aspirational brand. I want to own it. I can't afford it. I will get a cheap bike and I will pay 12 bucks a month and get the content because I want to be part of the community and my friends are on the bike and I want to do classes with them.

Brian Withers: Then maybe in a couple of years I can afford the bike.

Tim Beyers: Maybe in a couple of years I can afford it.

Brian Withers: I want to upgrade.

Tim Beyers: Or I'll buy one off of craigslist or something like that. Those tailwinds, I don't see those as headwinds. I see them as tailwinds. Go ahead Brian.

Brian Withers: The other thing, and I did a little bit of research before the show on Friday, I went on to Craigslist and I could not find one. I live in Raleigh, Durham, Chapel Hill. There's over a million people that live in our area and I couldn't find one on Craigslist.

That should tell you something. The other thing that I'll say is, I've owned a lot of exercise equipment over the years and I bought a spin bike, it may have been ten years ago, and it's the only thing that is still around. You can actually see it right there, there's my spin bike.

Tim Beyers: Nice.

Brian Withers: It's connected to nothing, but I can set my laptop up on it and I can watch Fool Live or I can pay the 13 bucks if I wanted the subscription, but it's been, for me, the only thing that's stuck around, and there's something about a spin bike that gives you a great workout in a short period of time and it's easy and accessible.

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