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Is The Peloton Era Coming to an End?

Is The Peloton Era Coming to an End?
Image Courtesy: Unsplash
Written by Varsha Pednekar

Peloton, the at-home fitness company, founded in 2012, experienced unprecedented highs when gyms shut down in 2020 due to the COVID-19 pandemic. 

Its success was so high that at the end of June 2020, Peloton had doubled its customer base to 3.1 million, compared to a year earlier. In August 2020, it filed to go public. Peloton’s 2020 revenue was $1.8 billion – double what it was in 2019.

But in 2021, that success started unraveling rapidly as COVID vaccinations became available and the world started opening up, including gyms and fitness centers. The company’s sales fell 17% from a year ago in the quarter ending September 31, 2021, and it lowered subscriber and revenue expectations. So much so that people began selling “like new” or “barely used” Peloton equipment for half the retail price on Facebook and Craigslist.

The Success Of Peloton 

Founded in 2012, Peloton rose to become a fitness unicorn, by selling exercise bikes with large internet-enabled touchscreens that played live broadcasts of fitness classes. 

It transformed into a true powerhouse during the pandemic as people looked for ways to exercise during lockdowns. In 2020, the company’s revenue hit $1.8 billion, roughly double that of previous years, and became profitable for the first time in its history. Its stock rose by almost 400 percent over the year. 

While it had an abundance of products, Peloton was struggling to churn out bikes fast enough to meet demand during the height of the pandemic. At one point, the company even resorted to flying rather than shipping products in order to keep up with orders, which increased its transportation costs tenfold. 

Peloton thrived not only by allowing users to work out from the comfort and safety of their homes but also by simulating the experience of gym classes and communities with virtual group sessions featuring purportedly elite fitness instructors. 

The Current Scenario

Shares of Peloton have already been crushed in 2021, down by nearly 30%, but the stock is still extremely expensive. The company expects to produce revenue of $4 billion in fiscal 2021, putting the price-to-sales ratio at 8. 

That wouldn’t be very high for an IT company, but Peloton derives most of its revenue from selling fitness equipment. It’s also worth noting that Peloton reported a net loss in its most recent quarter despite incredible demand for its products.

Regardless of all this, Peloton can certainly succeed as a company in a post-pandemic world. But whether the stock can maintain its ultra-high valuation as people return to gyms and fitness classes is another question entirely.

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