Should I Buy Peloton (PTON)? Finance YouTuber Analysis

Travis Hoium argues that Peloton is not a sustainable standalone business due to declining connected fitness subscriptions and revenue, leading to continued net losses. He believes the company's only viable path is to be acquired, as its current trajectory is unsustainable despite a good product.

“I think Pelaton needs to find a buyer for the company. This is not just not a business that's going to be sustainable long term, but it does make a really good product.”

The YouTuber states he is not an investor in Peloton due to a continued decline in members and a high churn rate for their app, indicating an unsustainable business model. While financial results show improving margins and positive free cash flow, the fundamental question of whether Peloton can return to growth remains unanswered, making it a questionable investment for growth-oriented portfolios.

“The concern and the reason that I'm still not an investor in Pelaton today is the number of members continues to decline.”

The analyst expresses skepticism about Peloton's future despite recent stock gains, citing declining revenue, weak guidance for the upcoming quarter and full year, and an unsustainable debt-to-EBITDA multiple. While the company has achieved profitability through cost-cutting, the lack of growth and the high churn rate in subscriptions make it an unattractive investment.

“I've got more questions about Peloton today than I did even just a few days ago because of this weak guidance.”

The analyst believes Peloton's recent partnership with Costco, offering bikes at a lower price, is a strategic move to increase hardware sales and, more importantly, drive subscription growth. The company's profitability is almost entirely derived from its high-margin subscription revenue, and increasing the subscriber base through wider bike distribution is key to improving net income and free cash flow. While not a 'sure thing,' the company is trending in the right direction and is a leader in connected fitness.

“I think everything about pelon's future depends on are they able to grow that subscription number... if there is I think the stock can continue to run higher.”

Travis Hoium suggests buying Peloton, but only after the company secures a clear CEO and long-term strategy. He notes that recent operational improvements, such as profitable hardware sales and growing subscription revenue, indicate a positive shift. However, significant debt and the lack of stable leadership remain concerns that need to be addressed for the stock to see its next leg higher.

“I want to see what that long-term direction is, have they found a CEO that's actually going to lead the company for the next four, five, maybe 10 years, that is something that we need to see before this stock is going to take its next leg higher.”

The analyst argues that Peloton is a buy despite its significant drop, citing improved financial stability with a new billion-dollar term loan and positive free cash flow in recent quarters. The company has shifted its strategy to focus on profitable hardware sales and high-margin subscriptions, and future growth is expected from partnerships and corporate sales. The risk/reward profile is now much more favorable.

“yes shares of pelaton are down 97% since their Peak during the pandemic but this stock is actually looking a lot better today than it has at any point in the last 2 or three years”

The analyst views Peloton's recent partnership with Google Fitbit as a positive step towards becoming a horizontal fitness content company, distributing its content through multiple platforms. While the company's core business still struggles with profitability and slow subscription growth, these partnerships represent a strategic direction that could improve incremental margins and create a flywheel effect for subscriptions. However, the analyst notes that the turnaround is not yet complete and the financial impact of such partnerships might be small initially.

“I think the turnaround story for pelaton is starting to make sense but we're definitely not not there yet.”

The YouTuber is holding Peloton shares, believing the company's strategic shift to focus on its core connected fitness subscribers and recent cost-cutting measures, along with debt refinancing, could lead to positive free cash flow. While acknowledging past failures and ongoing risks, he sees potential for a turnaround if the company can achieve sustainability and modest growth in its premium subscription segment.

“I'm not selling my shares because I want to see this turnaround work a little bit.”

The YouTuber owns Peloton and is maintaining a 'hold' stance due to uncertainty about the company's future strategy, particularly regarding its app business. While the connected fitness segment shows strong customer loyalty and positive free cash flow, the app's declining subscriptions and high churn are concerning. He wants to wait for a few more quarters to see if a viable growth strategy emerges.

“I'm going to stand Pat and do what I think a lot of investors should do in many more situations which is absolutely nothing I'm not going to add to my pelaton position I'm not going to sell my pelaton position I'm just going to wait and see what happens over the next few quarters”

The analyst views Peloton as a recovery play in the 'Fitness as a Service' sector, highlighting its shift from a hardware-centric model to a high-margin subscription service. He notes the significant increase in subscription revenue and decrease in operating costs, suggesting that if the company can grow its app subscriber base to several million, it will be a phenomenal long-term investment despite current debt.

“If they can this will be a phenomenal investment but if there's no market for that kind of app then it won't be because this is a company that does still have about $1.7 billion in debt on the balance sheet so there's a lot of lot of risk there but I think the risk reward balance is what I'm really attracted to.”

Travis Hoium believes Peloton has significant long-term turnaround potential despite its stock being down 97% from its peak. He argues the company has a strong business model shifting towards a software-as-a-service subscription focus, which he expects to become profitable as operating costs decrease and subscriber numbers grow. The main challenge is communicating this shift to consumers.

“I continue to think that this is one of those stocks that has a ton of potential to turn around the business long term.”

The analyst owns Peloton but is not adding to his position. He notes that while Peloton is becoming a leader in the connected fitness market and improving its gross margins by shifting to a subscription-heavy model, the company is still not free cash flow positive and subscriber growth is stagnant. He questions if the total addressable market is large enough to justify significant upside.

“I'm not buying more is until we see that inflection point you see pelaton move towards growth in both its subscribers and then the subscriber Revenue more than just kind of one or two percentage points a quarter the Stock's going to be kind of bouncing around until we get to that point and we're not quite there yet”

Travis Hoium believes Peloton is a long-term recovery play, arguing that the company's strategic shift from hardware sales to a broader fitness subscription model with high-margin recurring revenue makes it compelling. He highlights improving free cash flow, strategic partnerships with Lululemon and TikTok, and a strong value proposition for consumers as key drivers for potential growth and a significant turnaround in 2024.

“I think now might actually be the best time to buy Peloton stock. There's a long-term recovery play here and if we start to see momentum in that direction this could be a company that's generating a lot of free cash flow really quickly in 2024.”

The YouTuber views Peloton as a turnaround play making the right strategic moves by focusing on app distribution through partnerships like TikTok and Lululemon. However, the company is not yet profitable and has debt, requiring close monitoring of subscription growth and financial metrics in 2024 to confirm the strategy's success.

“Peloton in its current form is really still a turnaround play. The company is not profitable, not generating positive free cash flow, so it's really hard to look at this company and see how we should value it.”

The analyst sees Peloton as a high-risk, high-reward opportunity, shifting from a bike seller to a broader fitness content company. He believes that if the company can grow its app subscriptions and continue to reduce operating costs, it will achieve profitability and significant stock momentum, despite current negative member trends and a significant debt load.

“if these Trends continue both on the revenue side growing those subscriptions and like I said I think we haven't seen that really take hold yet but that's something we need to watch for in 2024 and if those operating costs continue coming down that's why this could be a phenomenal stock next year”

The YouTuber is slowly accumulating Peloton shares, viewing it as a long-term buy despite its high-risk nature. He believes the company is successfully transitioning from a hardware-centric model to a software and subscription-based business, evidenced by growing subscription revenue and gross profit margins. The strategic shift, including expanding content modalities and partnerships, positions Peloton for future growth, although profitability is not expected in the immediate future.

“this is a stock that I've been adding slowly over time but don't want to get too overextended because it's absolutely still high risk”

Travis Hoium argues that Peloton's shift to a streaming-first, app-based model, similar to Netflix's transition from DVDs, presents a tremendous upside for investors. He believes the strategy is sound, especially given CEO Barry McCarthy's background at Netflix, and that the low price points for app access offer significant growth opportunities by expanding the potential customer base beyond hardware owners. The lack of significant competition in the streaming workout space also supports this bullish outlook.

“if they can be successful using some of the similar similar playbooks I think the upside for investors is really tremendous right now”

The YouTuber is holding Peloton stock because he believes the company is undergoing a necessary and strategic business model change from a vertically integrated hardware company to a horizontal services company focused on its app. Despite recent stock drops and subscriber losses, he sees potential in the high-margin subscription business and the long-term strategy of expanding app offerings and partnerships, even if the market is currently impatient.

“I still think that kind of taking the right strategy I hope we see more Partnerships more people come into that top of the funnel more people start to pay even something even if it's the discounted 6.99 price for the app remember remember the app in the subscription business is extremely high margins so you want to have as many customers as possible even if they're not paying your highest price tier because once you film one of these classes you can deliver it for effectively zero marginal cost to each one of these new customers so that's absolutely the right right strategy but it's going to take time for this to play out it's going to take time to go from launching a brand new app to having hundreds of thousands even millions of subscribers in that app I think Peloton can get there I think it's taking the right strategy this but the market isn't patient enough right now to let that play out so that's why I'm holding on to this talk interested in buying more over the next few weeks but I'm also going to be monitoring this closely over the next few quarters as we get a little bit more data about how the app is going”

The YouTuber argues that Peloton has fundamentally reshaped its business model under new leadership, moving from a hardware-centric company to a subscription-first fitness content provider. This strategy broadens its addressable market, lowers barriers to entry, and leverages internet economics for high-margin growth, making it a compelling long-term investment despite past struggles.

“I like where Peloton is headed, I like the strategy and I think investors really need to rethink what they think about this stock.”

Hoium believes Peloton, despite past struggles, is now a much stickier subscription business. He highlights its consistent subscriber growth, new tiered subscription options that don't require hardware, and the potential for high incremental margins as the user base expands, making it an attractive long-term investment.

“I think Peloton has actually become a much stickier subscription business than it has ever been and now that it has this massive Suite of content it's much more attractive for users.”

The analyst believes Peloton's recent earnings, despite market reaction, show positive long-term trends. He highlights subscriber growth, increasing subscription revenue, reduced hardware losses, and progress towards free cash flow positivity. He also notes Peloton's stronger financial position compared to competitors and potential for growth with new app tiers.

“I still think the long-term story for Peloton continues to be very positive I like this stock I bought a little bit earlier this week I will look to buy more in the near future but you have to take a long-term view on Peloton because we simply don't know what a quarter what things are going to look like quarter to quarter we just want to see those long-term trends heading in the right direction and that's what I saw this quarter”

The YouTuber believes Peloton is undervalued by the market, citing the new CEO's improvements in financial position and a strategic shift to a razor-and-blades model, where hardware sales lead to high-margin, sticky subscription revenue. He notes that despite slower growth post-pandemic, subscriber numbers are stable or rising, and subscription revenue is increasing due to price hikes, while competitors like Nautilus and Beachbody are struggling. The company's bundling strategy and loyal customer base suggest significant operating leverage potential.

“I've said that this is one of the stocks that could 10x over the next decade.”

The analyst suggests Peloton could be a good long-term buy if its upcoming earnings report shows progress in key areas. Specifically, he is looking for improvements in hardware gross margins, continued subscriber growth, successful price increases, and reduced churn rates. If these trends are positive, it indicates the company is moving towards becoming a high-margin software business.

“if it starts to show more signs of being on a road to recovery this could be a stock that does really well over the next few years”

The YouTuber believes Peloton is a high-risk, high-reward turnaround story. He highlights the company's shift to a subscription-focused model under new CEO Barry McCarthy, emphasizing the high-margin subscription revenue and improving operating expenses. He sees significant growth potential given the large fitness market and the company's diversified offerings beyond cycling, suggesting it could be a '10x stock' if current trends continue.

“I'm not selling my shares and potentially looking to add more especially if we get another quarter or two of data that shows that the strategy is going well”

The YouTuber is a current shareholder and user of Peloton products, expressing a desire for the company to succeed. While acknowledging the company's turnaround plan and positive subscription growth, he is not adding to his position until there is more concrete evidence of the hardware business becoming profitable and operating costs being brought under control. He emphasizes the importance of upcoming earnings reports for assessing the plan's effectiveness.

“I am a shareholder I am obviously a bike user so this is a company that I would like to see Thrive long term but I am not adding to it at this point until we get more positive information”

The analyst advises avoiding Peloton stock due to significant financial distress. The company is burning cash at an alarming rate, has declining revenue, negative EBITDA and free cash flow, and insufficient cash on hand to cover short-term liabilities. There's also a lack of historical financial data to properly assess its long-term viability, making it a high-risk gamble.

“For me if I look at this business I think it's a pass... I would stay away from the stock until you get a little more clarity.”

The YouTuber suggests buying Peloton, noting its significant price drop from its peak, making it more reasonably valued. He highlights the company's strong user base, unique business model combining equipment and subscriptions, and expansion into new fitness offerings. He also speculates on potential rebound if COVID-19 lockdowns increase again.

“shares are now trading for just 3.5 times this year's expected sales of 4.6 billion which would be more than double last year's sales so still some strong growth in this company.”