Peloton didn't buy Enve, they bought Precor the fitness equipment company from Amer Sports, which still owns Enve.

Take ALL the fitness machine money?

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"What's your claim?" - Ben Gravy
"Your best work is the work you're excited about" - Rick Rubin

Sell more fitness equipment? That's what Precor does.

A bit of a side hijack but I thought some of you may find his milding amusing.

By Market Cap


Saudi Aramco $2.03 Trillion
Amazon $1.6T
Pfizer $215B
Intel $200B
Nike $177B
NextEra Energy $149B
Citibank $126B
Royal Dutch Shell $111B
Goldman Sachs $89B
Fedex $75B
Peloton $44B
Northrop Grumman, General Dynamics, Conoco Philips ~$44B
American Airlines $14B
United Airlines $12.8B
First Solar $10.5B
Ironman ~$1B

When I look at this, Pfizer is barely 5 times more valuable than Peloton!!! Peloton $44x more valuable than Ironman and 1/4 the value of Nike and similar market cap as some established defence guys and petroleum multinationals. I kind of live in a world of hype businesses generating outsized valuations and nuts and bolts solid businesses generating backable valuations....in any case, interested to see where peloton goes with this, but getting Precor under the wing takes it more to building out into their valuation.

....in any case, they have a lot of financial muscle to do a lot of things quickly if they want to and transform the industry. Even looking at the series D round that Tonal did for $110B at a purported valuation of $1B.....all of this is betting big time on people actually doing a huge amount of working out from home and opening their wallets to do that.

Zwift's series C of $450M at ~$1B valuation seems to make more sense. At least it has a real sticky community of users who are lifestyle people and a massive pro athlete following so stream of future earnings kind of seem to have a line of sight.

I am not sure how Peloton grows in to a $44B valuation, but things like this Precor acquisition kind of starts laying some additional foundation.

On a side note Amazon Alex fund in an investor in Tonal Series D, Zwift Series C. Long term I hope that Zwift surpsasses Peloton and certainly Tonal

So something to consider in the valuations- not all these valuations trade on the same multiples. Peloton is uniquely interesting because it has both hardware and SaaS components and SaaS trades at a very high multiple. It's really the tech stocks that are fueling the market. Peloton has figured out how to both make a profit on the hardware and to have massive margins on the software. Worth noting that they're doing like 750mm in revenue right now- no shrinking violet here.

I suspect that folks are waking up to the fact that Peloton has pretty much disrupted the whole in home fitness space at this point by combining a pretty high quality user experience with decent hardware. Yah it's not really for those of us with focused pain caves, training, etc. But for people like my folks it's perfect.

This is why I don't pick stocks. I've looked at Peloton since it came out with both wonder and disdain as I just don't see the draw of paying $50 per month or so for some random fitness instructor to go rah-rah-rah and lead my workout. And yet they are rolling in the dough. I'll shut up now and return to my pain cave.

I generally don't pick individual stocks, but I do follow a lot of them just due to curiosity. When I pick individual stocks it's closer to gambling/speculation than true investment. All my actual investments are just in index funds.

Sure, in 6 months, once 75% of the willing population will have been vaccinated... how many people will be buying 3K trainer + subscription.

My guess, less than today, thus multiple should be low.

Short

I'd guess the plan is

1. own the manufacturing process as this deal comes with 2 facilities and the expertise in design and production and Peloton really needs to ramp up production to keep up with demand
2. gives them entry into lower msrp machines under a different brand name. Its a different market and doesn't dilute the prestige of the peloton name
3. gives them entry to commercial sales with hotels, gyms, schools. What if every hotel had a Peloton studio instead of a workout room, you try it on vacation, love it and buy one for home, they just sold an addtional unit.

I think this is a very good buy for them

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Boots
Fleet Feet Rochester, NY
Fleet Feet Buffalo, NY
YellowJacket Racing, Rochester, NY

Random question. What made you pick NextEra to be on the list? Or did you pick up this list from somewhere else?

I work for them and our CEO jokes that we are the biggest company no one has heard of.

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blog

I respectfully disagree. I switched from riding on a Cycelops Magnet trainer with a PM to the Peloton this Fall after watching my wife get motivated every day to use it. It is a solid stationary bike with a smooth pedal stroke, and I find it very motivating to take the classes. The data it provides is really helpful, and I am riding far more than I ever did on my trainer. It has motivated me to ride 7 days a week, and I have done several 2-3 hour long rides, taking several classes back to back. I would never have done that on a regular trainer. Riding out of the saddle is much smoother because the bike is built like a tank. It doesn't move. The screen is easy to read, provides cadence, resistance, power, average, basically everything you need.

There. I fixed it.

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no sponsors | no races | nothing to see here

This is what I had read as well. Peloton is selling bikes faster than they can make them, wait time is about 1-2 months right now. In the past 3 months 4 of my 30 coworkers with have purchased a bike and a few more are are in the contemplative faze and will probably pull the trigger soon. A whole ton of people in the OR department have purchased them as well.

I don’t quite understand the math of market caps and valuation. But Peloton has seemingly hit it out of the market. An easy all in one at home workout solution at a time when people are staying at home more due to the virus. I think I saw as of September they had 3 million subscribers with 1 million of those being people who have Peloton equipment. And per dc rainmaker they are currently pumping out 250k bikes per quarter. Their potential users (people who want to exercise and get fitter) is massively larger than say an Zwift user or repeat Ironman racer

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Matt

My wife did a live class the week before Christmas. There was 12,000 people taking the class. The numbers just seem to be getting bigger every quarter. Can you imagine being a spin instructor and knowing that 12,000 people are following your every move?

I personally thing peloton's market cap is way inflated for how sticky they really are with their SaaS subscriptions. But if they use the capital heft to solidify the overall position with purchase of Precor and associated acqui-hire of engineering and product team to make them more sticky, then more power to them

I would personally like to see Zwift destroy both Peloton and Tonal but I am biased. It is also why I don't own any fitness oriented stocks. I see Zwift doing real innovation and adding to quality of life. peloton and Tonal just try to move the gym experience into the home thereby killing the gym which has a lot of community value. Zwift builds on a need that was poorly serviced. I suppose one can argue that gyms poorly serviced a need for people to train in private and Peloton and Tonal service that.

Long term anything that take humans apart into more isolation I view as not great for society. For now during covid19 companies like Peloton are great, but I see more societal value in American Airlines with a market cap of $14B that brings people together than Peloton at $44B that keeps people apart....but clearly the market disagrees with me lol!!!

Peleton P/E 2039
Tesla P/E 1388
Ceva P/E 36600 That is some up side hope

Why do you feel that Peloton takes more humans into isolation than Zwift? Both basically involve a person in their house on a bike staining at a screen at the same time as other people in their own houses starting at their own screens

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Matt

Zwift is not explicitly cannibalizing gyms, it is improving the user experience of cyclists already training indoors. Basically they are charging a subscription to provide a better user experience for people who were training indoors in isolation. Now they have made that training experience interactive.

Roughly Tonal and Peloton are pulling people out of gyms and hurting that market. It's just my view. I am sure people at all these companies have their views.

This is super interesting and encouraging to read. My wife literally brought up the idea three days ago, a completely surprise to me, as she’s interested in some light bike but more yoga and core classes that they also offer. I’ve never been interested at all but the more we talked about it the more I got excited too. We sprang for the bike+ yesterday. This year has been an absolute shit show in my household and I’ve stopped caring about my principles and I just want to ride something. I don’t currently have a spare room to dedicate to a pain cave, I don’t have room for my bike on a trainer AND a Peloton for her, so I’ll ride the Peloton. I’m excited for us both. Glad I’m not alone.

And for the side-topic of stocks, I find it super interesting that this acquisition happened. Valuations aren’t always comparable as has been pointed out. When Peloton went public I thought it was crazy, but I work “alongside” various SaaS platforms and I totally get the monetization angle now. If they can migrate some of their app/ecosystem to Precor machines and make that membership experience a bit more portable, I think it’s a big win - they gave a hotel finder on their website, you can see what hotels have their bike and how many, so for members who are traveling, I can really see the attraction for them in acquiring a wider potential “audience”.

Zwift isn't going after the spin class market. Peloton is. Zwift and Rouvy are layers onto the indoor training market for the folks that are triathletes and road cyclists that already train indoors.

There is crossover to some of that market, but the vast majority of Peloton's target market are the gym and "Soul Cycle" type. Phoenix has a local chain called The Madison and several Cycle Bar franchises on top of the gyms that offer spin classes.

Generally, the target market of Zwift and Rouvy are pretty narrow and Peloton is out there for the general "lifestyle athlete" which is a significantly larger market.

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Washed up footy player turned Triathlete.

But there is also a segment of people who never go to the gym who are buying peloton and the likes because they want to workout but don’t like going to the gym. There are thousands of people, probably more, who are too self conscious to go to the gym and workout around others and now have a way to exercise.

And honestly, if it wasn’t for swimming I would never go to the gym either. I have an exercise bike that I have been using a lot more than Zwift because it is more fun for me now. But I’m also not interested in triathlon right now.

I would also bet that some people who normally would be at a gym will go back as a supplement when they feel comfortable doing so.

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Twitter - Instagram

peloton will do a deal with some of the largest fitness chains (or build their own) where their software and bikes will be integrated with the physical presence and you will pay a combined fee. They will blend the in home and gym experience into 1 package.

This is me right now. I can’t plan on racing. Getting out of the house for 1-2 hours a few times a week is a struggle. I here big box gyms, and the closest CrossFit location will cost me double what the Peleton will cost me, assuming I go twice a week for a one hour drop-in. I think tons of people have similar limitations and Peloton’s platform and community make sense for that - I make one post on Facebook about who has one and get 50 comments in a day, that’s a lot of people to connect with while spinning, if I choose to.

> and SaaS trades at a very high multiple. It's really the tech stocks that are fueling the market.


I'm convinced the reason for that is only tech nerds really understand what cloud is, the rest of us especially investors have no idea what it is, but they all want it.