$PTON
In its most recent quarter, Peloton reported 2.3 million connected fitness subscribers. These members purchased a Peloton exercise machine and paid $39.99 per month to access Peloton's live and recorded exercise classes.
Overall, subscription revenue totaled $281 million in the fourth quarter.
Compare that to Peloton's total revenue of $936 million in the quarter, and it shows the bulk of its sales come from products.
That could be a challenge for the company because the products it sells can last for several years. That means once Peloton saturates its total addressable market -- estimated by management at 75 million households -- its sales could drop off significantly.
Peloton would then have to rely on existing customers upgrading older machines every few years.
The good news is that the subscription side of the business will bring in recurring revenue at higher margins. Indeed, the gross profit margin of the subscription business was 63.3% in the latest quarter compared with 56.8% a year earlier. And there is the potential to increase prices on subscribers over time as the company adds content. There is also the potential to improve the gross margin on the subscription segment as Peloton adds more members.
The cost of creating the content will be roughly the same, but it will be spread out over a larger audience.
Peloton has taken a big hit over the past month moving from $112 down to the mid 80s but in saying that, It looks like it’s found some support on the daily chart.
Whether it will hold or not, that’s another question.
Only time will tell.
Going into next week this should be on watchlist.
If price is able to hold it gives a good opportunity for a long but if it breaks below support, it also gives a good opportunity to go short.
Keep your eyes on this one.
Watchlist this.
Overall, subscription revenue totaled $281 million in the fourth quarter.
Compare that to Peloton's total revenue of $936 million in the quarter, and it shows the bulk of its sales come from products.
That could be a challenge for the company because the products it sells can last for several years. That means once Peloton saturates its total addressable market -- estimated by management at 75 million households -- its sales could drop off significantly.
Peloton would then have to rely on existing customers upgrading older machines every few years.
The good news is that the subscription side of the business will bring in recurring revenue at higher margins. Indeed, the gross profit margin of the subscription business was 63.3% in the latest quarter compared with 56.8% a year earlier. And there is the potential to increase prices on subscribers over time as the company adds content. There is also the potential to improve the gross margin on the subscription segment as Peloton adds more members.
The cost of creating the content will be roughly the same, but it will be spread out over a larger audience.
Peloton has taken a big hit over the past month moving from $112 down to the mid 80s but in saying that, It looks like it’s found some support on the daily chart.
Whether it will hold or not, that’s another question.
Only time will tell.
Going into next week this should be on watchlist.
If price is able to hold it gives a good opportunity for a long but if it breaks below support, it also gives a good opportunity to go short.
Keep your eyes on this one.
Watchlist this.
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