Market Cap Thinking pt 2

Investment Analysis Clubs Saul’s Investing Discussions
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I’m certainly in that camp when companies are small. But at some point (perhaps somewhere between 1b and 2b in annual revenue…for any company not named Zoom?) we must concede that hyper-growth is not realistic. And hyper-growth is a big reason why these companies can defy expectations.

GuyLucky posted an interesting article last year along those same lines. It’s a few years old but identifies the revenue journey between $100M and $1B as the proving ground for true hypergrowth. In an admittedly abbreviated sample I believe that range generally syncs up with many companies discussed here.

Post with Guy’s thoughts:

https://discussion.fool.com/below-is-a-link-to-an-article-i-beli…

Article alone:

https://www.mckinsey.com/industries/technology-media-and-tel…

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I would take a look at OTRK.
They have a similar business model to LVGO but instead of diabetes they manage behaviors health.
Their growth rate has been in the high double digits and possibly triple digits.
If you read
The latest conference call the CEO. Answers analysts questions comparing them to LVGO.
He says their revenue is only about a year behind LVGO but their market cap and valuation is much smaller
Curious what you think and Rhnaks for the great post as always Bear

I just looked at OTRK and it’s very intriguing. A quick search shows that it was mentioned (under its prior name of Catasys) a couple times on this board already by Nilvest at the end of March and by fish13 back in August 2019 when LVGO was being discussed. It has triple digit revenue growth (151% projected this year) and a telehealth model which is gaining traction. OTRK was growing well even before the recent shift to telehealth with 131% revenue growth last year. I just bought a very tiny position to keep it on my radar. Its EV/S is currently only 7. It’s a micro cap and I’m leery of putting too big a bet on it before more research.

Do you know how its model compares to LVGO’s?

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I believe recent IPO nCino also offer significant upside over the next years. Revenue growth is 50% in the most recent quarter, however this is dragged down by low growth in professional services. ARR growth was 66% in Q1 which was the second fastest growth rate over the last 5 quarters (no prior data), so there is currently no sign of slowdown.

Gross margins were 58% in Q1 expanding from 47% two years ago. Here again the higher mix of subscription revenue is the driver behind gross margin expansion. Long-term GM target probably around 70% in line with Veeva systems, as both use the Salesforce platform for which the costs are reflected in the GM.

Software is incredibly sticky as the whole bank operating system runs on this. NCNO is currently still in the landing phase but similar to VEEV, I see a lots of continued upselling by adding new functionality to the system. NRR at 147% is best in class.

Forward EV/S around 30, this is reasonable compared to some peers considering the 66% ARR growth:
Okta - EV/S of 30 with 45% revenue growth
COUP - EV/S of 35 with 45% revenue growth
VEEV - EV/S of 26 with 30% organic revenue growth

Given the stickiness of NCNO’s software, they deserve a relatively high EV/S.
Current market cap is around 6.2 billion, fairly small with lots of room for growth.
Glassdoor rating 4.6/5 and 99% CEO approval, always a good indicator.

I currently have a 5% position but will probably get to 8-10% in line with COUP and OKTA.

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I read through the conference call quickly. The one thing that caught my eye was their cash position. With debt of 33 mil and cash on hand of 12 mil with a 4.6 cash burn rate per quarter unless they start to generate cash instead of use cash they may need to borrow again or dilute soon. Will need to review BS to see when debt is due. Definitely intriguing though.

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Do you know how its model compares to LVGO’s?

Hi Remmdawg

they are in the field of Telehealth.
It seems they have a similar treatment method of chronic diseases. It looks like they are initially focused on substance abuse patients. It seems that they save the insurance companies money from their treatment.
The first slide in their Q1 slideshow says “Driving lasting behavior change for members with unaddressed behavioral health conditions through AI-powered engagement and tele-health enabled interventions.”

The CEO is Terren Peizer
In the Q1 call he mentions a tailwind from Covid
“Alongside these operational improvements, COVID-19 has created some unique opportunities for Catasys. The shelter-in-place orders have led to more people in our outreach pool being at their homes which makes it easier for our team to reach them. We had record highs of reaching over 20,000 members in March compared to an average of approximately 13,000 members reached in January and February and 5,200 reached in the first quarter of 2019. Further, these people are currently more open to accepting help than they previously might have been”

It looks like they are creating new avenues of treatment

"Looking forward, our pipeline continues to build, including several meaningful opportunities with leading managed care providers. One national Medicare Advantage plan that was previously delayed looks to be on track to launch at the start of the third quarter, and we are in dialogue for a significant expansion with an existing partner. We are continuing the design of new OnTrak disease area pilots for congestive heart failure and COPD, with the objective of launching two new pilots in the second half of the year. "

An analyst asks Terren
“A lot of times, I’m hearing investors comparing you with Livongo, and you guys are two of the leaders in telehealth right now in the market. How do you see Catasys relative to Livongo though?”

Well, we’re different companies. They’re – obviously, their main business is diabetes space. It’s a SaaS model. Most of their customers are employees. We’re the only pure behavioral health, telehealth play. And of course, we’re at the intersection of – our members have multiple chronic diseases and multiple behavioral health diseases. But as such, our member community is care and treatment-avoidant. The other telehealth and a company like Livongo are dealing with the treatment seeking. And we’re just structurally different. There’s definitely a more capital-intensive model than ours as well. I think if you look at our margins at scale, they all have a higher gross margin because we embed the cost of our care community and the cost of services provided.

But if you look at our EBITDA margin because we have significantly less marketing expense and they’re marketing straight to consumers, if you will. Our EBITDA margin should be slightly higher. But the only comparison I think you can make is we’re both in the telehealth industry. Their multiple is a lot higher than ours. But it’s interesting. If you look at their year, they reported last night. But in 2019, they did $169 million of revenue.

I think if you redo the math, and based on what I think our growth rate continues into next year, you could easily see that we could surpass that number. I’m not giving guidance yet for 2021. But you could see how we could be ahead of their 2019 number. And all last year, they traded around a $3.5 billion plus or minus market cap. This year, and last night, they reported, they should do somewhere around $296 million. And right now they have over a $5.2 billion market cap. So, I believe we’re only about a year or so behind Livongo. So, I look forward to being compared on a multiple basis, which I think we’ll get there."

He seems confident they are growing as fast or faster than LVGO and that their stock price should have room for multiple expansion.

This company also seems to be in the sweet spot of what Bear was looking for with revenue much lower than the 1 billion mark.

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some thoughts on OTRK vs LVGO and why I exited OTRK and concentrated on LVGO

  • OTRK is in the business of proactive management of behavioral health… they are primarily focused on addressing drug addiction AFAIK…
  • their per member price is much higher (I believe ~$6K / member / year vs LVGO charges ~$1K for diabetes and half that for behavioral health…

ofcourse OTRK solves different problem… Their pitch is that they get an addict off fatal path… but that means their business model is to get may be one or two years revenue from a member and then member would fall off (presumably because member is off the bad path)… so while they are doing good for society, their revenue base is not quite SaaS like recurring from same client… where as LVGO diabetic members likely to stay on board certainly lot longer than 2 years…

  • There was a short piece that got me to do a bit of dd…
    what I found was that number of logos they showed in their investor pitch were reducing over a period of two years… turned out that they were showcasing big names too early when they just them for trial… and as some of those names dropped out after trial, you see that logo quietly gone…

  • That led me to see that their revenue concentration is much higher among 5 customers with top customer is in 20% or 40% range (when I checked last)…

  • They are growing at enormous rate from a much smaller base… and FCF is quite far for them…

  • Most important is management - OTRK CEO Terren has his loud fans and louder detractors - he may not be a bad guy but he has been a wallstreet wolf… compare that to LVGO management and you will not think twice on where to put your money…

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“Given the stickiness of NCNO’s software, they deserve a relatively high EV/S.”

Rubenslash, what do you think about the fact it more than doubled at launch from expected 31 to 72.
Is it fine to brush aside this & still buy? Could it come back tumbling down back to 31?

What do you guys think?

Thanks,
Praveen

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it more than doubled at launch from expected 31 to 72.
Is it fine to brush aside this & still buy? Could it come back tumbling down back to 31?

It certainly could, but the 31 to 72 jump just means the company lost out of 50% of the potential proceeds because the banker poorly judged the market value. Their stock probably should never have been offered at $31, but either due to poor judgement or straight up dishonesty (allowing the bank to gift a big gain to some preferred customers) the IPO was priced far too low.

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The price was far too low and it makes me question what NCNO management was thinking when they priced it around 15x sales, leaving a lot on the table. There was no way that stock was going to open in the 30s. It traded as high as 91 but I took a small position at 69. Will buy on any dips.

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NCNO will never have the margins of Veeva as they have a much worse deal with Salesforce. Salesforce gave Veeva a total sweetheart deal which they will never repeat. NCNO are required to pay 20% of revenues to Salesforce so gross margins will never be comparable to other software names except those with some of kind of resource intensive model.

Veeva is a great company. Would highly recommend it to anyone here if you are comfortable with the valuation (presumable yes if you are on this board as it’s a fair bit less expensive than the popular stuff here). But a fair amount of this quality is enabled by Salesforce.

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“Given the stickiness of NCNO’s software, they deserve a relatively high EV/S.”

Rubenslash, what do you think about the fact it more than doubled at launch from expected 31 to 72.
Is it fine to brush aside this & still buy? Could it come back tumbling down back to 31?

What do you guys think?

Thanks,
Praveen

I did my own due diligence prior to the IPO and anticipated a valuation around 7 billion, it seems to be stabilizing around 6-6.5 billion now. The fact that it doubled doesn’t mean anything, it was significantly underpriced compared to public peers.

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GuyLucky posted an interesting article last year along those same lines. It’s a few years old but identifies the revenue journey between $100M and $1B as the proving ground for true hypergrowth. In an admittedly abbreviated sample I believe that range generally syncs up with many companies discussed here.

Thanks, Stocknovice. I remember that thread well. That’s exaclty the topic that’s been swirling around in my head. The market seemed to suss out, even back then, that ESTC wasn’t really a 60-70% grower. I’m baffled at ZS. At its scale, it should be growing much faster if it is truly an exceptional hyergrowth company worth of a $16 billion valuation and a PS over 40. But these are the mysteries of the market. I believe I will be best off ignoring outliers like ZS and sticking to my guns. The reason for my post yesterday is that I’m truly having trouble finding candidates. I don’t want to settle for the Zscalers of the world just because the Zooms and Crowdstrikes and Fastlys are hard to find.

OTRK

I highly recommend Nilvest’s post here: https://discussion.fool.com/some-thoughts-on-otrk-vs-lvgo-and-wh…. I agree with his concerns and would note a few more:

  • the name change is always at least a yellow flag, but they had ANOTHER name previous to Catasys: Hythiam Inc.

  • the 12m in revenue last quarter suggests that the customers they tout aren’t actually paying them much, if anything

If OTRK does actually exceed 90m in revenue this year, and they look on track to become the next Livongo, then I say happily by them then even if they’re 2x or 5x as expensive as today. This company definitely goes into the “prove it” category for me. I have zero faith that they will be able to do what they say they will.

VEEV

Veeva has been discussed here a lot. Most recently some fantastically thorough coverage from Bob:
https://discussion.fool.com/veev-first-impressions-34521669.aspx…
https://discussion.fool.com/veev-21q1-earnings-and-analysis-3452…

If you’re wondering why I have not bought, just look back at the first post in this thread. Veeva has well over 1 billion in annual revenue (will probably get close to 1.5b this year), and until the March quarter was growing at an under 30% pace. I don’t find it reasonable that the uptick was likely to continue, but as Veeva is now a $40.5 billion company, you’re kind of having to pay for it as if it is going to grow at 40% for the foreseeable future. In short, VEEV’s revenue and valuation is similar to TWLO and DOCU, but I believe VEEV will grow slower over the next 5 years (and in the next several quarters). I’m not interested in any of the three, because I just don’t think the growth is compelling enough to pay up like this. (I can say the same for DDOG, OKTA, and COUP.) This is the reason I only have meaningful positions in 7 companies right now. It’s hard to find ones that have it all!

NCNO

Thanks, Rubenslash. nCino is quite interesting, but do you think they can keep growing subscription revenue at 60%+ for years? The large professional services spend suggests a long sales cycle. We haven’t had great success with companies like that maintaining hypergrowth. Do you think nCino is different? Maybe tell us a little about their customers and what you think is nCino’s secret sauce.

Thanks everyone!

Bear

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Do you have any companies that you feel could be a lot larger in the next few years? Please tell us about them. Why do you feel that they could be larger? For instance, are they growing revenue extremely rapidly?

I will go ahead and throw Peloton into the ring. Here was my initial write up on the company → https://discussion.fool.com/introduction-to-pton-34527814.aspx?s…

They will be reporting their Q4 in August and guided for 128% YoY growth at the midpoint. I believe growth will be at least 150% YoY.

They are hovering around a market cap of $18B, so they might already be a bit bigger than you are looking for, but they have the revenue to match. They are going to do around $1.8B in revenue for fiscal year 2020 with growth of over 90% YoY. Growing revenue 100% and nearly a $2B run rate is incredible, I don’t foresee DDOG, CRWD or any others of my SAAS holdings accomplishing this feat.

Let’s look a bit beyond Q4 though. The bikes are currently back ordered about ten weeks from what I have read. I also read that Peloton does not account for the revenue until the bike is physically delivered. This means they have a ton of revenue expecting to hit the books for the following quarter, Q1 2021 for Peloton. With this in mind, I fully expect Peloton to guide for growth of 100% or higher for their next quarter.

Then, following Q1, we get into the meat of the year for this business. Q2 and Q3 are always strong due to seasonal demand around the holidays. I would not be surprised to see Peloton report growth north of 100% YoY for the next four quarters!! (including the upcoming Q4 report in August). And this is not off some puny base of $100M in revenue per quarter, we are talking about a business doing over $500M per quarter and climbing towards profitability.

Tell us why you think this is sustainable.

Peloton already pre-announced on May 12 they hit over 1M subscribers. I think this number will come in closer to 1.1M next report. Subscriber growth has be never been below 93% YoY and retention rate has never been below 93%. This rapid growth of their subscribing members coupled with impressive retention rates will be the reason why this growth will be sustainable. The best part of all, is subscription gross margin is going to be above 60% this quarter and I would bet it never dips below this again.

In addition to the $39/mo subscription, the new $13/mo subscription is starting to take off. This subscription is for those who don’t own the bike but want to access Peloton’s vast library of content for other work outs such as yoga. My wife and a few of her friends now subscribe via this service and absolutely love it. They canceled their memberships with gyms like Orange Theory and Empower because they get all they need from the $13 subscription.

I think too many people think of Peloton as a hardware company, similarly to Roku. This company is about the growth of its loyal subscribers, and they are executing very well. I expect an absolute blow out Q4 report and think it is worthy of a spot in all portfolios. I could see this company being worth $50B+ in a hurry.

Rex

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Thanks for posting this StockNovice, this is a fantastic article with actionable findings based on real data. I’d encourage everyone to read the article.
aside: I have high regard for McKinsey research, but I know McKinsey gives some folks heartburn that may have experienced them in management consulting engagements, and I get it. They come in, ask you what the problem is, ask what you’d do to fix it, then go out and find research to support your argument and then regurgitate your ideas back to you with data, all while charging you $500/hour to do it. I’m exaggerating a bit but you get my point. That said, I do value McKinsey data and research. side note: One of the McKinsey authors worked at Google (and now Dropbox) after her time at McKinsey and one worked at Oracle before her time at McKinsey, and at F5 Networks now, so they are in the middle of the SaaS business.

I read and re-read the article and was astounded to see the similarities in what Saul says about how to evaluate a company. McKinsey’s research involved about 3k companies (statistically significant) and pretty much validated Saul’s approach. Further, the research was done in ~2013 & 2014, well before any COVID dynamics. (some of the SaaS companies we follow are being labeled as “COVID stocks”, which is inaccurate and unfortunate, IMO).
Guy did a nice job of summarizing it but I’ll summarize the similarities and some notes in tabular form.


Factors contributing the most to long term success
McKinsey	   			Saul				notes
Revenue growth (CAGR >60%)	>35%, better if much more		Mck: best if you catch company before crossing through $100MM
Margin not as important	        high gross margins important	        high margins help ring out the top end of the market cap 
Large markets			large TAM, big potential		examples: LVGO TAM = $47B, CRWD=$32B in '22, FSLY=$35B
Good Monetization model	        high recurring revenue		        subscription model results in high recurring rev
Rapid Adoption			high customer growth, QoQ	        broad appeal best/avoid custom products; if growing fast, custom products not likely, due to limited engineering resources
incentives matter		high insider ownership                  creating proper incentives for the leadership to remain committed to the company, through act one and beyond.

Two take-aways

  1. As Stock Novice summarized, revenue growth trumps all, and McKinsey even quantifies it: Supergrowers”: companies whose growth was greater than 60% CAGR when they reached $100 million/yr in revenues were 8x more likely to reach $1B in revenues/year than those growing less than 20%. (satisfies Saul’s second criteria, behind being recommended). The problem is that there simply aren’t many companies growing at 60% or more per year whose letters don’t begin with a Z, L, C, D, or P. Literally, there are like only 5 or 6 in the mix of companies that have the other attractive criteria. That’s where I believe Saul’s other criteria helps suss out the potential winners.
  2. Growth matters more than margin, but margin does help, and this supports Saul’s approach. The article doesn’t really highlight this but the data suggests margin, EBITA margin in this case, helps ring out the top end of the market cap, moving a company from a +10% Market CAP CAGR over industry average to +23% market cap CAGR over industry average. This is a statistically significant increase and I’m surprised the authors didn’t highlight this as much. Their takeaway was: Growing revenue faster has twice as much impact on share price as improving margins. But if you can find a company with both growing revenue and high margin, all the better, right? This supports Saul’s suggestion of valuing high gross margin, which is a first order variable to EBITA margin.
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Subject: Re: Re: Market Cap Thinking pt 2
Author: PaulWBryant | Date: 7/24/2020 6:49:04 AM | Number: 69853
GuyLucky posted an interesting article

Bear. You have posted extensively on this subject. A while back you summarized your methods for estimating valuation. I can’t find the reference. Would you be so kind as to provide one or more references.

Thank you.

draj

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Peloton already pre-announced on May 12 they hit over 1M subscribers. I think this number will come in closer to 1.1M next report. Subscriber growth has be never been below 93% YoY and retention rate has never been below 93%. This rapid growth of their subscribing members coupled with impressive retention rates will be the reason why this growth will be sustainable. The best part of all, is subscription gross margin is going to be above 60% this quarter and I would bet it never dips below this again.

In addition to the $39/mo subscription, the new $13/mo subscription is starting to take off. This subscription is for those who don’t own the bike but want to access Peloton’s vast library of content for other work outs such as yoga. My wife and a few of her friends now subscribe via this service and absolutely love it. They canceled their memberships with gyms like Orange Theory and Empower because they get all they need from the $13 subscription.

I think too many people think of Peloton as a hardware company, similarly to Roku. This company is about the growth of its loyal subscribers, and they are executing very well. I expect an absolute blow out Q4 report and think it is worthy of a spot in all portfolios. I could see this company being worth $50B+ in a hurry.

Rex,

You make quite the case for Peloton. A couple questions:

  1. You mention the 60% subscription margin…why wouldn’t it be higher? Perhaps because they have to pay the people teaching the classes?

  2. I saw in the June thread you linked to that Peloton will release a rowing machine. I’m thinking of upscale apartment complexes and hotels that could potentially carry the whole peloton line. But I was wondering if you had other thoughts about Peloton’s optionality. Could they become a platform for these types of classes? In other words, are they just going to hire enough instructors to cover their subscribers, or could other classes take place over their platform where they just charge a fee? Could the $13/month be expanded to several levels based on types of classes, engagement each month, etc? I’m sure you’ve thought of some other things I haven’t too, so please share.

  3. I’d love to see them be profitable this quarter! (Hardware of course makes up a lot of their revenue, and though hardware margins seem solid, there’s a limit to how much they’ll be able to grow hardware revenue, and it won’t be recurring, so they really should be turning a profit.) They had a ~$50 million non-recurring litigation expense in G&A last quarter, so without that they would have been very close to break-even. With almost twice as much EBITDA guided for this quarter, I think they will be profitable (analysts think so too). Rex, do you think profitability will continue after this quarter? Have they talked much about their long term model? Whatever the case, what you said here bodes well for next quarter: The bikes are currently back ordered about ten weeks from what I have read. I also read that Peloton does not account for the revenue until the bike is physically delivered. This means they have a ton of revenue expecting to hit the books for the following quarter, Q1 2021 for Peloton.

Thanks so much for bringing this to the board!

Bear

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Bear,

We also recently saw the announcement of Roku having a Peloton app available on its devices, and that app is already there on Apple TV and Android and iOS (and Mac now with the newest generation)… but is that a new growth avenue or one they have already tried to some degree and foundered at?

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Thanks, Bear. I will do my best to answer the questions -

You mention the 60% subscription margin…why wouldn’t it be higher? Perhaps because they have to pay the people teaching the classes?

Due to the cost of creating all the content, including the salaries to the instructors. Peloton pride’s itself on having the best instructors in the world so I imagine they are paying top dollar. Here is an excerpt from their latest 10-Q

Subscription cost of revenue includes costs associated with content creation and costs to stream content to our Members. These costs consist of both fixed
costs, including studio rent and occupancy, other studio overhead, instructor and production personnel-related expenses, as well as variable costs, including
music royalty fees, content costs for past use, third-party platform streaming costs, and payment processing fees for our monthly subscription billings.

As we are beginning to see them scale, the margins are starting to improve greatly as the fixed cost can be spread out. Yes, they are going to need to continue to create content but the cost to create isn’t like Netflix.
However, I will say the videos they produce are quite impressive. I was able to find this video from a couple years back. Take a look if you have never seen a Peloton class before. Make sure you catch the clip around 2:20 in which a live DJ was brought in to help raise the hype. https://www.youtube.com/watch?v=To5_6t0fzRc

I was wondering if you had other thoughts about Peloton’s optionality.

This is certainly an interesting question as I think there is a ton of potential for this company that most people don’t currently see. From the hardware perspective, you mentioned the rower but I know a cheaper treadmill is also in the works (the treadmill cost > $4,000 currently, yikes). I am certain there are more products in the pipeline.

One other area which I could see them expand to is for members to work with a personal trainer virtually via Zoom. I am sure there are many members out there that would pay a pretty penny to work one on one with some of the top instructors, or even in a small group along with a handful of other members, creating a little community.

As I mentioned in my introduction write up, Peloton is just starting to expand internationally. I think this could unlock a huge market for them. This might not be directly correlated to optionality, but this is an obvious next step for Peloton which should greatly increase their TAM immediately.

The last thing I can think of for Peloton to continue expanding is for its third revenue segment - apparel. This might not excite many investors, but I believe this third segment could become significant for Peloton if they decide to go that route. Athleisure is a rapidly growing market. Look at LuLuLemon, Athleta, or Outdoor Voices. I am seeing these brands pop up everywhere. I have started to see some Peloton gear when I am out, but with the cult following this company has, I could easily see their own apparel line start to take off.

I am not sure if Peloton can become a platform that other gyms/studios will use. I think what makes Peloton so great is the ability to access their vast library of content from the comfort of your home or wherever you are. I want to caveat all of this by saying I am not workout-aholic, I do not own a Peloton, and I do not consider myself to be a very creative person. I trust John Foley and management to leverage their strong brand and loyal members to innovate and create things I cannot think of myself.

Do you think profitability will continue after this quarter? Have they talked much about their long term model?

Peloton did not expect to be profitable so soon, here is their CFO, Jill Woodworth, on their most recent CC -
“We previously said we expected to achieve profitability in fiscal 2023, a goal we have achieved far sooner than originally forecast. The extraordinary events taking place over the past two months have measurably expanded our market opportunity and accelerated the ongoing shift to Connected Fitness.”

I do believe profitability will continue for Peloton in fiscal 2021 because of the strong growth of the number of subscribers along with the improvement of subscription gross margins. I expect they will do around ~$750M of subscription revenue in FY21 with gross margins of ~65%. Subscription revenue is clearly going to be the driver for Peloton long term and they know this. Here is Woodworth again on the CC -
“We plan to continue to prioritize Connected Fitness Subscriber growth and invest aggressively behind new products, software, fitness programming and international growth.”

I am still relatively new to Peloton, as I just starting following this company in May. The more I have researched, the more I have been impressed. It has grown into about a 5% position for me, but with the run up of most the SAAS names lately, I believe this is a business that still has potential for multiple expansion. Couple that with 100% growth and we have the twin engines!

I am pounding the virtual table on Peloton ahead of their Q4 report because I think it is going to be Zoom-esq. Like I said, I expect a massive beat this quarter, along with huge guidance for Q1 and FY21. Outside of Zoom and maybe Fastly, I cannot find any other company who stands to benefit more long-term from COVID-19. Like Zoom, Peloton was at the right place at the right time and had the amazing product and content to capitalize.

Long PTON

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Just a small comment on Peleton, there are many virtual cycling programs available (Zwift and Trainer Road being the most popular). Any body interested in cycling will using Zwift or Trainer road; Peleton is more for those that aim to “keep fit” rather than “athletes”. The advantage of using a program like Zwift is that you are use your own bike mounted on a smart trainer (in contrast, for Peleton you need to splash out a huge amount of cash to buy a special stationary Peleton bike, which you cannot use outside)- I just wanted to mention this because I think programs like Zwift are a more convenient, more flexible, and a cheaper alternative to Peleton. Granted in programs like Zwift you do not have an animated coach shouting at you to motivate you while you work out as do get with Peleton - but programs like Zwfit have other ways for motivating their users (virtual racing etc). On the other hand programs like Ziwft are limited to cycling and running, whereas in contrast Peleton seems to offer a broader range of services - yoga, rowing etc. I guess Peleton is targeting a slightly different market in that they aim at the “keep fit” customers and not “athletes” as such. Anyway, the only point I wanted to make is that I think its worth to consider other virtual workout programs as being a potential competitor to Peleton going forward.

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That "animated coach’ reminded me of some horrible nagging mother in law. But that is just me.
I greatly appreciate the posts on Peleton because I would never have come across it on my own.

I do feel that the classic high growth SaaS companies that many of us own ae well known now there is not much chance of a larger P/S ratio sp for higher stock prices we will only have half the bipod , earnings. So I am looking for some additions to my ownership list.
If indeed there are 2 markets for these cycling products the "keep fit"one must be larger than the “athletes” one and the former have more money to spend on fancy equipment.

Would expanding the “keep fit” to “get fit, or at least fitter than you are now”, designed for older people (again they have the money)be feasible? If so it might have to extend to strength training . Surgery ,disease, broken bones there are lots of older people weakened by illness. They need to get stronger, nothing dramatic, or many will die soon.

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