Peloton Q4 Report

Wow. Zoom most certainly takes the cake for the most jaw-dropping report of this quarter, but Peloton takes the outright silver. I have brought Peloton to this board a couple times, as I expected it was the beneficiary of major tailwinds thanks to COVID. Today, we found out just how much they benefited. Here are my thoughts -

Financial Highlights
– Total revenue of $607M, up 172%
– Total gross margin of 47.6%, up from 44.8% last year
– Net Income of $89M, up from a loss of $47M
Adj EBITDA of $144M, up from a loss of $24M

Subscriber Metric Highlights
– 1.09 million fitness subs, up 113%
– 3.1 million total members, up from 1.4 million
– 76.8 million fitness sub workouts, up 333%
24.7 average monthly workouts per sub, up from 12.0

Q1 Guidance Highlights
Total revenue of $725M, up 218% !!!
– Adj EBITDA of $85M, 11.7% margin
– 1.33 million fitness subs, up 135%

FY21 Guidance Highlights
– Total revenue of $3.58B, up 96%
– Adj EBITDA of $238M, 6.6% margin
– 2.08 million fitness subs, up 90%

Hands down the most impressive metric of this entire report is the 218% guide for next quarter. Earlier in July I wrote this in my post to Bear, “I would not be surprised to see Peloton report growth north of 100% YoY for the next four quarters!!” Well, we can go ahead and check two of those four quarter after this one and the Q1 guidance.

If we assume Peloton beats their guidance by 10%, as they have beat by 10%+ for all three quarters as a public company, this would mean revenue of nearly to $800M growing almost 250%. Do you really think Peloton is going to slow from over 200% growth to less than 100% for the full year like they forecast? Talk about sandbagging.

Let’s be conservative and assume FY revenue of $4 billion, which would result in growth slowing down to 119%. For a company growing well in the triple digits, I think this deserves a 10x forward multiple in this market. I know, I know, gross margins are only in the 40’s, but where else can you find a company growing like this at this scale besides Zoom and maybe Shopify? Growth at this rate and scale deserves a premium.

This is obviously only one way to look at it, but I think you can make the case Peloton should be worth close to $40B today, which is a far cry from its current valuation of $25B. In a market that does not offer too many discounts, I think this is one that is quite undervalued.

This really was a remarkable quarter. There is a lot more I could dissect and might do so at a later time once the CC transcript is published. I know most people focus more on software names here, and rightfully so, but I would encourage you all to take a deeper look at this one after it just reported an absolute blow out quarter.



Obviously, the big question with any company that has gotten a COVID-19 boost, is how durable that boost is. With ZM, there are certainly skeptics, but there are also strong indicators that both Zoom has taken a significantly larger share of the market than they had and that the market itself had expanded significantly as companies and people discovered the virtues of video in place of in person.

Other businesses clearly have had a peak which is probably not durable … I can’t believe the number of contractors that have been coming and going from the house across the street during all this. So, the question for Peloton is whether this is a temporary surge from people forced to stay at home or whether it will be a durable change, e.g., because continuing work from home will cause people to want this option.

Color me skeptical.


Bull thesis in a nutshell.

  • You can get a Peloton delivered on their payment plan for $49/mo. On top of that, the subscription is $13/mo. $62/mo total is $37 less than what I used to pay for membership at a gym.

-This includes a wide variety of classes available through their app that you can access according to your schedule.

  • Also cuts out the gym paperwork.

  • Peloton is social. The thing that keeps people exercising is the social component. Research proves it. It is EASIER to be social on the Peloton than it is in the gym. Socializing in the gym is intimidating.

-The social aspect is what will prevent Pelotons from going the way of the NordicTracks collecting dust in people’s basements.

-The shift to suburbia is here to stay and Pelotons are nice for big houses in towns where things are more spread out. (suburbia)

-The brand is winning.


We’ve had a Peloton for a little over a year. My wife does use it consistently and has had more friends join during the pandemic. At the same time we have a few friends who bought it but just don’t use it much. Maybe Peloton doesn’t care whether it’s used. They certainly have a great brand recognition and the courses are good. My concern has always been scaling. As far as I know there isn’t much up-selling beyond the standard subscription. So the total market is limited to the number of households who can afford a Peloton. And of course they face competition; I don’t think anyone buys a Peloton without researching “Peloton alternatives” or other ways to create a Peloton facsimile for cheaper.

With our fast growing SaaS options, it’s just that much harder to justify investing in a company where margins and scalability are lower and things like inventory need to be considered.


Thanks for the summary, Rex!

Let’s be conservative and assume FY revenue of $4 billion, which would result in growth slowing down to 119%. For a company growing well in the triple digits, I think this deserves a 10x forward multiple in this market. I know, I know, gross margins are only in the 40’s, but where else can you find a company growing like this at this scale besides Zoom and maybe Shopify? Growth at this rate and scale deserves a premium.

This is obviously only one way to look at it

I agree with this case for a $40 billion+ valuation, and I’ll offer another way to look at it. Their TTM subscription revenue alone is $364m. And it’s growing at roughly 100% YoY. In a couple quarters PTON’s subscription revenue alone will be more than DDOG’s total revenue is now. In the next 12 months it will be more than CRWD’s is now. And PTON’s is growing even faster. These companies are worth roughly the same as PTON (between 25b and 30b), and they don’t have the additional several billion dollars in non-subscription (but profitable!) revenue PTON has.

That parenthetical shouldn’t be overlooked either. PTON went from losing 20 cents last quarter to making 27 cents this quarter! And the (very impressive) CFO said they expect to be profitable every quarter going forward. In a year from now, or less, we can start looking at their PE ratio. And it too will look very attractive. They’ll certainly have more than 27 cents in each of the next few quarters, so, well over $1/year (aka a PE of less than 100 based on current share price). How fast can it get to $2/year, and then 5 per year? They have 1.8b in revenue in the last twelve months and guided for 3.65b in the next 12, so EPS will grow fast, too. (The EBITDA guidance is a huge sandbag. They just turned in 23.7% EBITDA, and guided for 11.7% next quarter and 6.6% for the year. If you believe that I’d like to sell you some oceanfront property in AZ.)

PTON is not SaaS, but it is a growth company that has had growth at insane levels pre-Covid and during-Covid, and they expect amazing growth for the next 12 months, which I truly hope will include some post-Covid times. Growth will of course slow at some point, but they’ll have built subscription business of a very large scale by then.

I agree that it is currently a bargain.



I’m long Peleton, invested about a month after IPO. The thing that concerns me is that it’s basically a hardware play. PTON did $607M in revenues but only $121M was subscription revenue. It’s a great business plan (own both the hardware and the subscription) however I worry about the Company’s revenues should the hardware business drop or become saturated. They are very dependant on people upgrading their hardware and new product development. That said, I went to order and The Peleton Bike+ was on backorder after 90 minutes. So right now it’s not an issue however long-term, the dependence on hardware sales concerns me.


Visited my son in Missoula, Montana over the long weekend. He has been working for a moving company since Feb. He has been trying to learn about the market since he will inherit my portfolio and he needs to learn. He told me that awhile ago he started noticing these stationary bikes. Almost every day. Stock was at $15-$20.


I wasnt a fan of PTON when it first came out, but the results look really good. I think one thing to note is the segment of the fitness products (Connected Fitness Products) and the services component (Connected Fitness Subscriptions).

The fitness products have a gross margin of 43% and is the slower growing segment compared to the subscriptions that have a gross margin of 57%. (Just looking at 10-k numbers) I think the subscriptions are also growing much faster. So I think the overall gross margin is going to mask the fact that the subscriptions will become a larger and more profitable part of the business.

Also, I recently learnt that subscribers do not need a peloton bike, and can really buy any generic bike instead to access the content. All this sounds like PTON might potentially be a “netflix” of fitness where they have a large library of content which is great given it’s a higher margin segment too. I think eventually the play would be less on the bikes (which is a commodity business) and more about content and the social element of it.

Not a shareholder, but wished I realized all these way earlier, just my 2c.


I agree that Peloton is the winning brand in this category.
I also like that they sell hardware but get a recurring revenue with their subscriptions.

But I don’t agree with some of the reasoning, which just seems like a strange justification

-This includes a wide variety of classes available through their app that you can access according to your schedule.
My gym has lots of classes too! It isn’t something for me and obviously with Peloton you can do a class anytime. But you can also ride any bike and watch TV, Netflix or Youtube anytime as well.
Or listen to a podcast or music.

- Also cuts out the gym paperwork.
My gym has no paperwork.

- Peloton is social…It is EASIER to be social on the Peloton than it is in the gym. Socializing in the gym is intimidating
My gym (actually 2 of them) are social as well. I go to a rock climbing gym and a racquetball gym.
Both require partners. It isn’t intimidating to be social at all for these sports. Same for people I see doing other sports like basketball, etc. Different people have different experiences for sure.



It’s been mentioned but the fact that you can download the app and access workouts without any peloton hardware may end up being a decent source of revenue IF they spend time and money making that a viable option without drawing from the hardware side of the business. That’s where I’m skeptical. Seems hard to do both.

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I used to be a huge skeptic of PTON - I just didn’t get it. How were they ever going to hook enough people - plus everything was sooo expensive. Just go run or cycle outside - it’s beautiful out. But I just kept hearing people left and right just swear by them. Finally I decided to give them a try last August, paying just for the digital subscription - at the time it was $20 for the 3 accounts. Within a week my wife and I were hooked and we finally understood what all the hubbub was. We cancelled our YMCA membership and have never gone back to the gym since.

The classes are world class. To take a yoga class that good it would cost $25-$40 per session (not a month - per class) anywhere else. Even the 5-10 minute stretches are amazing. I’ve had some serious back and IT band issues the past decade and my problems have started going away. I just didn’t realize what I wasn’t doing that I really should of been doing. I am able to lift now for the first time in 8 years - which I never thought I’d be able to do again. You quickly begin to feel like your own personal trainer - at $13 a month…

I still don’t own a bike or tread, and probably won’t for the next couple years - but we prob will own both when we move back to the States. Plus the row machine when they come out with that. Their services are just that valuable.

But this isn’t a story just about me - every person I know who now uses Peloton has a similar story like me. My brother-in-law who sells Precor exercise machines and was physical trainer can’t stop raving about them. Even my 60 year old non-athletic parents are hooked. My sister has been using their meditation classes to go to sleep instead of taking ambien. And my wife has been able to take prenatal yoga classes. Plus it’s super convenient - you work out on your schedule - No driving to/from the gym trying to catch their scheduled classes.

Even if people go to the gym after COVID winds down, I think peloton digital will supplement their gym routine. It’s just too good of a deal - And every digital subscriber, even though only $12.99, is just added profit to their bottom line. Their goal is to hook people on the digital membership and then hopefully upgrade them to their equipment - bc that’s where the real margins are (the increased monthly membership / not the equipment) - but I think they’ll see tremendous growth even without the equipment - and I’m sure rates will increase over time. I’d pay $25-$30 a month for a digital membership per person.

Saying all that, I still didn’t think PTON was an $8B company 6 months ago. I just didn’t think they were going to be able to get enough peoples attention and there would be too many skeptics unwilling to subscribe when their current routine worked. Then COVID happened - now I think the snowball effect is going to be unstoppable and we’re not going to see a slowdown in their growth for a long time.


Mschmidt, you just said you can YouTube or Netflix any time as well. That’s the whole point. Take a look how Netflix shareholders have done compared to any linear TV station or cable company where you do things on their terms.

Peloton is bringing the gym group activity classes to your home on your time. No more changing clothes after work and rushing to gym to meet their class schedule.

As for riding a bike by yourself, name one bike maker or exercise equipment company out there worth $25 billion and $600 million/quarter revenues.

This company is a new phenomenon. The early skepticism on this company was that it was a fad. I’m starting to think that can be put in a rear view mirror. Next issue is handling the inevitable onslaught of competition.


I added this morning and at the close.

PTON was doing phenomenally well pre covid. Now it’s blowing the doors off.

Think about all the gyms that are now closed and will not reopen. All those memberships. The getting ready, the driving, the parking, then returning home.

Like it or not, covid or not we are entering into a stay at home lifestyle. Was already happening in the fast casual restaurant industry with food delivery pre covid. Was already happening with entertainment via Netflix and others killing the theaters. Was already happening with shopping via Amazon and others putting a huge dent in brick and mortar retail.

Now it’s happening in the fitness health and well being industry. A pandemic to get a good segment of the couch potato population to maybe start taking their fitness a bit more seriously.

I can pay 100.00 a month for a gym membership or work out at home for 20.00 a month and get cycling, rowing, tread mill, yoga, cardio, weight training, stretching, all led by top personal trainers. Why is this seemingly expensive? How will brick and mortar fitness compete? When a popular trainer on Pendleton can reach thousands of clients at any time at the same time anywhere in the world?

You also don’t have to buy a Pelaton bike. We bought a 400.00 bike on Amazon and ride via their app with our IPads. Great teachers live or recorded. Great community. Part of my weekly health and wellness routine now.

I’ve made the mistake in the past of not picking up and riding a legit trend. Not this time.

Long term PTON is a great buy IMHO



Rex, first of all, thanks to bringing this to the board. I opened position in August and added after earnings.

I find that it’s very noteworthy of how CEO makes bull investment case in the last conf call:

„John Foley

…In closing, I want to propose a pretty simple concept that fitness is moving into the home, because home is a better location. With roughly 35 million treadmills in U.S. homes today, American consumers have said that they want fitness at home. It just hasn’t worked until now. People are now moving on to Peloton, because of our incredible instructors, because of our strong and supportive community, because of our best-in-class hardware, our networked and gamified software, our world-class music, our unparalleled delivery experiences, and so much more. Again, these are not COVID dynamics, these are fundamental sustainable dynamics that meet people where they are with content and programs that exceed their fitness and wellness goals, and make it fun and engaging to workout at home. For the first time full stop.“

I like his conviction and facts confirm his view. It reminds me of Zoom which had a huge growth prior to pandemics and now this has obviously been accelerated. Peloton guides for ORGANIC top line growth (as opposed to Tdoc for example) 200% next quarter and around 100% next full year.

On the other hand, what I don‘t like is relatively low gross margin (mid 40s) and they guide it even lower to low 40s as they introduce cheaper products. What I also don‘t like is their reliance on equipment which they need to sell more and more in order to increase revenues. This reminds me of Saul‘s great comparison between „typical“ company which sells refrigerators or… bikes :slight_smile: and our SaaS company which focuses on recurring revenues. Of course, the equipment is a „door opener“ for subscription and my understanding is that once the business will mature in the future subscription part of the revenues will become much bigger part of total revenues than now (now 20% is sub rev).

Overall, I‘ve got a mid-sized position in Pton because

A) There is a huge tailwind in connected fitness market (also prior to Covid)
B) Peloton looks like a WINNER in the market with best products and best content (we invest in winners)
C) Company‘s growth is ACCELERATING and it has become PROFITABLE
D) Management team looks very capable.

My position will not become large/on the level of Zm, Crwd or Ddog due to the „weak“ point I‘ve mentioned above.



I wanted to thank you for yours posts on Peloton.

It prompted me to have a good look into them and I have built up a top tier position in them over the past 2 months. I’m very excited for the next few quarters!

I noted from the conference call notes how they have rained in their marketing costs because of the organic demand. I actually want to see them go BIG on marketing now, specifically focused on digital subscriptions, because I feel a lot of people still think you need a bike to get involved with them. I think this is a huge opportunity to become the netflix of fitness whilst covid is still raging…