Peloton's Big Bet, Revealed in 1 Chart
Even if you don't keep tabs on every up-and-coming company, you likely know of Peloton Interactive (NASDAQ: PTON) as the fitness equipment outfit that surged in popularity during the pandemic. Its exercise bikes, treadmills, and now its recently unveiled rowing machines are a top-of-the-line choice in each of their respective categories. The new rowing machine, for perspective, will retail for $3,195 when it finally becomes available for purchase.
What you may not realize, however, is that Peloton's goal isn't only to make fitness equipment. That's just a means to an end. The core business model here is generating recurring revenue from subscriptions to trainer-led workouts, both with its machines and the mobile app. To this end, the company was serving 6.9 million subscribers as of its fiscal 2022 fourth quarter, and those subscribers collectively paid Peloton $383.1 million during the period. Of that figure, $260.3 million was converted into gross profit, making up the entirety of the company's total gross profit.
And that's the crux of a key problem. While the impending debut of the company's "Row" machine is likely to spur another wave of subscriber signups, subscription growth was flat last quarter. This at least loosely suggests that a business model built around (very) high-end exercise equipment may not be one with a great deal of growth longevity.
Source Fool.com
