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Here's Why I'm Not Selling Peloton

By Neil Rozenbaum – Sep 7, 2021 at 11:30AM

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Lower prices will mean more subscriptions.

In this video, I will talk about the recent Peloton (PTON 13.00%) FUD, why the price reduction of the bike is actually a good thing, and its recent earnings report. I don't plan on selling any shares anytime soon; I actually expect to add in the near future. I previously talked about what Peloton should do to become a multibagger.

Lower prices

The company announced that it is reducing the price of its bike by $400, an idea it has mentioned in the past. The cheaper the hardware, the easier it will be to get it into people's households, which will make selling subscriptions much easier.

Q4 total revenue grew 54% to $937 million, and connected fitness subscriptions and paid digital subscriptions both grew triple digits year over year. Connected quarterly fitness workouts grew 75% YOY, but average monthly workouts per connected fitness subscription are down quarter over quarter.

More subscriptions?

Just like Tesla, Peloton wants to sell its product for less so more people will buy it. This will make selling subscriptions and insurance much easier, and we all know the market loves recurring revenue. And it won't surprise me if Peloton starts offering extra onetime services or experiences, as Disney does with Disney+ when new movies come out.

According to app intelligence service Apptopia, the use of the Peloton App has dropped 42% in the last four months. But what Apptopia doesn't take into consideration is that since May, iOS users can opt out of tracking, and users don't necessarily have to open the app to work out. And you have to take seasonality into consideration. 

For the full insight watch the video below. 

*Stock prices used were the closing prices of September 3, 2021. The video was published on September 5, 2021.

Neil Rozenbaum owns shares of Peloton Interactive and Tesla. The Motley Fool owns shares of and recommends Peloton Interactive and Tesla. The Motley Fool has a disclosure policyNeil is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.

Stocks Mentioned

Peloton Interactive Stock Quote
Peloton Interactive
$13.30 (13.00%) $1.53
Tesla Stock Quote
$194.86 (0.08%) $0.16

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

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