With gyms closed and millions of people confined to their homes, stationery bikes like those offered by Peloton (NASDAQ:PTON) are increasingly popular. The company offers a “connected fitness” system that allows users to follow remote workout classes from the bikes. With a massive surge in sales this year, Peloton stock is up more than 350% from its March lows.
The company’s growth in sales is largely attributed to the corona-economy. which has many questioning the durability of this stock in the long-term. Will the fitness bike lose its luster after the pandemic? In my opinion, no. Although Peloton’s claim to fame happened in 2020, the company has a lot going for it even in a post-pandemic world.
Here’s why this Peloton stock is a winner for the long-haul.
Peloton Stock Has a First-Mover Advantage
Peloton was one of the first companies to establish a presence in the niche world of remote spin classes. The pandemic, however, took its success to a whole new level. Peloton’s fitness technology allows users to workout alongside the instructor and their friends in a virtual environment. This is a trend that caters perfectly to the work-from-home environment.
Peloton started the year on a high note and demand has only increased since then. In its most recent earnings, the fitness company reported a 232% year-over-year increase in revenue at $757.9 million. Management expects this value to hit a whopping $1 billion in its next earnings report. While many will say that this is just a short-term tailwind, I truly believe that’s Peloton’s cult-like following will continue in a post-pandemic world. It’s also worth noting that the pandemic will create permanent changes in the way we live our lives. Working out and working from home could become the norm rather than the exception.
But given the first-mover advantage, there are numerous companies that introduced products and services in this space. More recently, Apple (NASDAQ:AAPL) announced the launch of its Fitness+ subscription. This allows subscribers to stream workouts on their Apple devices for just $10 a month. While the competition will put a wrench in Peloton’s short-term growth, the company’s growing user-base will sustain its expansion in the long haul.
A Great Brand Image
Peloton’s products and services cater perfectly to the pandemic environment but the company isn’t just selling a bike, it’s selling a lifestyle. This enabled the fitness-giant to create a strong brand that garnered a cult-like following – especially this year. Peloton introduced numerous social features for its virtual community to keep users engaged. This includes a subscription for just $12.99 a month. which provides access to a range of fitness classes.
Adding to this brand value is the Peloton user experience. The company’s virtual instructors have celebrity-like fame, which keeps users coming. This will play a huge role in enabling the fitness giant to expand its online workout offering. Moreover, the Peloton bike and subscription is a more cost-effective option to gyms. After the initial cost of the bike, subscriptions cost $39 and can be shared by the family.
A great brand image and user experience translated to some massive gains for the Peloton in 2020. In a year-over-year comparison, the number of workouts on its app increased by 306% and the retention rate stands at 92%. This is a testament to the high-quality workouts offered by the company. In addition to regular workouts like Barre classes, Peloton subscribers also have access to themed workouts featuring artists like Beyoncé.
It can be easy to question the durability of Peloton’s fame post-pandemic. But given its innovative product, global expansion efforts and customers’ changing habits, it’s safe to say that the Peloton culture is not going away anytime soon.
The Bottom Line
Working out at home is no longer an option for many as gyms continue to remain closed. However, experts predict that the pandemic will create permanent changes to our lifestyle. Working out at home even after the pandemic is one. This also means that we can expect demand for Peloton stock to remain stable in the long haul.
The company is also taking the necessary steps to set itself up for long-term success. Peloton is constantly innovating and recently released its new Bike+ that saw strong demand. In terms of growth, the fitness giant is also exploring new markets as it looks toward global expansion.
I strongly believe that Peloton stock isn’t just a pandemic darling but a great buy for long-term growth. This is the perfect time to jump on this investment before prices go any higher.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.