원문 보기
hey everyone meet kevin here is it time to buy peloton well let's talk about some pros and some big risk factors so we have to address we're talking about peloton and peloton stock obviously palton crashed after their last earnings peloton has been on a very very strong downtrend and it has not been very good for shareholders this is a company that has previously ran well into the 100 plus range 130 plus range i mean this was a darling of the pandemic and people loved buying a peloton but when you look at the day chart for peloton now it's just not that great you saw that 171 peak over here in february and folks since then it has been a bleed out essentially for peloton we did hit a temporary low over here in may but after the last couple earnings we just went down and down now i did sell out completely of my peloton as of uh somewhere around 113 is when i completely sold out which remember any time you want to know exactly what i'm doing you can here i give you an update on things that i feel in the market or companies i'm researching or companies i'm thinking about selling or or going heavier on anyway yeah peloton i sold it before the earnings uh the september earnings cycle and the reason i sold it then is because i started noticing declining search trends declining website traffic and the nail in the coffin for me was when peloton started reducing their prices as well as at the same time their delivery time frames were falling while we were in a supply crisis or a shipping crisis which is weird because you would expect that shipment times would go up if there's a shipment crisis so the only reason you would have shipping delays but then actually see shipping time frames go down for a new peloton bike is if demand was substantially lower and peloton was essentially trying to get product out of inventory or off the shelves so to speak and they weren't so reliant on waiting for manufacturing so these were really big red flags and we've seen these red flags developing really for many months now in fact if you take a look at the google search trends for peloton you've kind of been seeing this downtrend virtually all year and and so if even if you had sold or even if you had looked at some point here in the summer you would have seen the declining trend now we've kind of flattened out at this relative strength around 30 to 38 here uh but obviously this is substantially lower than where we were if we go back really i just want to see the last couple of years here but i'm going to zoom out obviously the pandemic bump very substantial this is 2019 over here pandemic bump was a little bit right around here is where he kind of had the pandemic bump uh panda people really wanting to work out as the pandemic lasts longer so we've obviously come down uh from the pandemic lows we're still higher with a search interest of about 24 than where we were previously with search interest around 10 to 12.
so trends are certainly ups but the stock price is also way up now in fairness peloton did ipo last year but the stock price is way way way way up from where it ipo remember it ipo'd for right around 27 per share it did fall as low as 19 a share during the pandemic which was pretty crazy uh that we did fall so low actually it was 17 and 70 cents uh is uh hello it actually fell there for a brief moment take a look at that uh but anyway and it did ipo shortly before that but what's really important now is asking okay are we in a position now where it makes sense to buy peloton again or are there too many risks that are still sort of written on the wall that we need to be aware of and why is the stock running so well today well the stock's running today because the company disclosed that it is selling 23.9 million shares which would usually lead the share price to go down but it's actually going up because a buyer was already located these aren't 23.9 million shares that are being thrown onto the market to essentially increase supply and any time you increase supply when demand remains constant price goes down very simple pq this is what you learn in uh econ 101.
now the shares were sold at 46 per share which was a little bit less than where the stock was this morning but it really served to create kind of a floor for the market and i believe that's why the stock is rallying about 12 today you've got the stock up 12 today to 53 dollars and 20 cents it did have a low yesterday of 46.70 and these shares were sold at 46.
and i believe that this 46 dollar purchase has really created a support level for the stock and that's why we're seeing this 12 bump today because folks are thinking that okay that's it we're not going any lower see yesterday when we hit 46.70 i believe the market was pricing in the risk that peloton stock could fall even lower that it could fall into the 30s and so you had a lot of hold on sort of buying activity now that you had a big buyer come in essentially a billion dollars worth of shares being bought it's like a billion point seven uh but anyway billion 1.07 billion there we go that's the correct number of how much money this raises for peloton now you've essentially created a at least a strong support line here at 46 because that's clearly where somebody was willing to buy essentially a billion dollars worth of peloton stock and i think that's why peloton's running right now but what we've got to know here is what could peloton potentially do with the money what pros are there with a peloton and then what risk factors do we want to pay attention to if we're going to actually invest in the company so pros peloton's going to be using this money to expand their facilities and maybe even use it for acquisitions now peloton has already been planning according to their latest quarterly report they're already planning on spending about 500 million dollars on on new infrastructure for their facilities uh developing probably their pre-core partnership pre-core partnership by the way really excited about that remember their pre-core partnership is uh not even so much a partnership it's it's peloton full-on bot pre-core they make a gym equipment that you usually see at hotels or gyms it's high quality gym equipment peloton bought them for around 400 million dollars i thought it was a steal and it really lets peloton and get into so many different verticals i mean think about it they could get into the the elliptical machines they can get into rowing machines they can get into strength training machines which which strength training alone is such a huge opportunity for peloton to have connected fitness in strength training instead of just yoga or or biking or treadmill or whatever now strength training that in my opinion is a huge opportunity especially if you can get machines in people's homes think about like a connected fitness bowflex uh via peloton so a lot of optimism for the pre-core partnership the company did have about 600 million dollars in cash they've got some extra marketable securities as well but if they're planning on spending 500 mil it kind of makes sense they were going to start blowing through cash pretty dang quickly especially since their free cash flow is negative because they just lost over 370 million dollars in this last quarter and that is not good so while i'm very very optimistic about this pre-core partnership i'm more concerned about some of the other things and other trends that are happening at peloton and unfortunately for me those negatives probably outweigh the benefit and the potential of what this billion dollars and investment by peloton into their facilities and manufacturing and maybe even for acquisitions or or other developments with pre-core could actually bring to the stock and so this is what we're gonna have to talk about now and those are the cons okay uh and it's also i suppose another pro would also be that hey look we've got uh a new year's resolution cycle coming up that is often good for fitness companies we also have the hope that uh once we fully get out of the pandemic and any traders who are in the stock kind of riding it as a trade stay-at-home trade get out of it and we get to a more neutral market that maybe we'll see less volatility and less pain towards the downside which could be good for the stock but in the meantime you've got some other bigger problems to worry about than this going from covid stay at home darling to not and those begin with churn okay let's take a look at their latest financial report and we're going to get an update on their turn numbers here so if we go ahead and look at the churn numbers we're going to see that as of september 30th 2021 they had churn of about 0.82 percent now you'll notice that's higher than the 0.65 percent on a monthly basis that they've had since 2020.
uh and the reason uh this is a little bit concerning to me is when you divide these numbers by each other you'll find out that this is an increase in the churn rate of about 26 now churn is still relatively low you'd have to compound 0.82 percent but were to really get a figure in terms of how many customers you might lose uh annually so but if we do just a rough approximation here you're somewhere around nine to ten percent of customers that you're losing on uh on an annual basis and this is probably expected for uh you know the connected fitness world uh somewhere around a 10 annual churn but the problem here is peloton used to cheer itself on its extremely low term and to see churn all of a sudden increase 26 in my opinion is a little bit problematic especially since we're also going into sort of this new reopened world the last thing we want to see is all of a sudden churn adjust to very high levels or higher levels than where they previously were and not actually come back down so i don't like this transition in churn 26 is definitely a lot of an increase for a churn in addition to that we've uh we've got a few other things so in my opinion create a few little problems uh declining workouts and advertising efficacy let's talk about both of those so declining workouts i thought this was interesting now this could just be a representation of less people being home as much but in 2020 you had 77 million workouts which worked out which came out to or calculated it out to about 58.3 workouts per user which i actually thought was a lot when i when i first saw about i noticed that i see it's average uh that's not the average monthly workouts rather this is the total workouts in millions right so you get 77 million workouts divided by 1.3 million people is how you get to about 58.3 workouts so that's about an average of what a little over one a week right well that average has declined about 17 again this could be because people are going back to work and they're not at home they're not home as much but it's it's still a metric to pay attention to and so we'll notice here that in addition to this churn increasing we're now seeing workouts at about 48.3 per connected fitness account as opposed to that 58.3 we previously had so 17 decline in workouts uh and on top of that we're noticing some pain in advertising efficiency and this makes me particularly concerned now one of the reasons that was talked about in the earnings call was that the apple transparency upgrade where apple has made it more difficult for advertising companies to target their customers thanks to new new privacy rules in the or on apple devices so in a quarter two of the 2021 calendar year peloton had 655.3 million in connected fitness product revenue 655.3 right but in the very next quarter we fell to 501.
that's pretty dang low that's not good that's a big decline that's a big decline quarter over quarter and it's a decline year over year so both ways you slice it you see that connected fitness product revenue going down which is a sign that the advertising efficacy is declining but not only can we see that advertising efficacy must be declining because all of a sudden product revenue is going down advertising costs are actually going up which reiterates that advertising efficacy is going down see in 2020 we spent 108 million dollars on sales and marketing i'm sorry sales and marketing was 114 divided by 601 that works out to about 19 in terms of how much they spend on marketing compared to the revenue they got from their connected fitness products so for every doll for every hundred dollars of product revenue that they made they spent 19 on advertising well for every 100 that were spent on products at peloton in 2021 we now spent 56 dollars on ads that's huge spending 56 dollars per 100 on ads compared to the 19 you used to spend it used to be uh you used to have effective advertising now you don't whether it's blaming apple or it's because consumers are saturated or because people feel like like they're aware of peloton the people who wanted it got it the people who don't want it aren't getting it and the ads aren't convincing them whether it's because peloton believes that their product is branded maybe too much as a luxury product which is something that they they mention see right here top line the perception that peloton is a luxury item we intend to amplify the platform's value proposition and really they're trying to attract younger people with potentially less net worth to try to get into the peloton network but so far their advertising is failing now you might think oh but kevin you know like their advertising was so much more effective during the pandemic because you could sell anything during the pandemic it was a pandemic it was easy to sell stay-at-home fitness equipment maybe that totally might be true and in fairness for the three months that ended september 30th of 2019 we ended up seeing connected fitness product revenue of about 157 million so obviously we're way up from there and they spent 77.6 million on marketing which works out to about 49 for every 100 of revenue so we've seen these larger numbers before but the problem is we're going from really high numbers of advertising per dollar of revenue to a low during the pandemic and then not up to where we previously were but worse we're now spending more money per dollar of revenue than we did even in 2019 when the company was less known and again you could make the argument that well the company was less known so it was easier to sell back then but wait a minute the more you have a network effect of of more people using peloton the easier it should be to sell like ultimately i want to be investing in a company where it's easier for them to sell not harder for them to sell and right now it's becoming harder for them to sell not easier especially even compared to 2019 which in my opinion that's a problem and that's not good uh in addition to this because they continue to reduce their prices their margin is substantially being impacted right now and i know this is a lot of bad news right now but uh it's the reality that you got to be aware of if you're investing into the company so their margin has fallen substantially back in 2020 their gross profit per 100 of bike sales or tread sales or whatever was about 39.5 so if they had 100 of revenue they took 39.5 of that as gross profit before things like sales and marketing and their uh you know general and administration and their research and development and their taxes right so 100 in for the bikes they'd keep 39.5 before they got to the other expenses so cost of goods sold is what we're subtracting there well now for every 100 they're taking in they're only keeping 12 before they get to sales and general administration and research and development which they're spending way more on those things now so it's no surprise that all of a sudden the company's losing 376 million dollars because they're spending like crazy they're not getting the product sales anymore and their product margin is plummeting because they're having to lower prices these are all not good things here's an example for you of how the math would look so they mention over here that their margin decreased substantially and that was primarily due to the decrease of their bike price from 1895 to 14.95 okay so let's understand this if at 1895 they had a 39.4 gross profit margin then that would leave them with about 746 dollars for every bike they sold now drop the price 400 take that 400 off of their margin now they're only making about 346 dollars 346 dollars divided by the new price of 14.95 means their margins probably somewhere around 23 percent it's a little bit lower now at 12 so because of supply chain issues and logistic expenses and stuff like that as they've mentioned here so we do expect that margin to come back up it's not gonna be 12 for forever we expect that to come back up and it really needs to because otherwise they'll never go profitable but still 23 gross profit is is substantially less than that 39.6 we used to have 23 divided by 39.6 uh is a reduction of about 42 percent it's a 42 decline in in gross margin and that's not good so you know having to reduce the prices to these levels makes me worried that peloton soon is just unless they innovate with some new products and they end up convincing people to use their products peloton might end up becoming a sas company which is really weird to say because obviously they're a product company that also sells a service uh you know they have the trainers uh they've got great service or great you know great software but uh the the problem is if we end up with zero margin on the hardware and we're really just trying to get subscription revenue fine how quickly are we able to grow subscription revenue well if we compare year over year for a company that's that's valued pretty highly i mean it's a 16 billion dollar company uh you know the grand scheme of things it's it's not extremely expensive compared to maybe other companies that are 50 to 100 billion dollars right but for a 16 billion dollar company we'd want to that that has no revenue we'd want to see some substantial growth right and we used to see substantial growth we used to see a lot of growth but take a look at this if we look at the subscription revenue subscription revenue very very important we are at 304 right now in millions of connected fitness revenue we used to be at 156 so that's pretty good that's a 94 bump so that is good we want to see that okay that's very very good now if we compare this to the good old days well we'll take a look at this we saw subscription revenue double in 2018 to 2019 from 31 mil to about 67 mil a little bit more than a double so this is good we're still growing that subscription revenue at a high pace so i do like that about peloton the question though is how long can we maintain this because now if we have subscription margin somewhere at about a third see they spend about 33 dollars for every 100 of subscriptions that they have in order for them to become profitable they're really going to have to get their sales and marketing their general administration and their uh research and development costs they're going to have to get all of these down substantially probably under 40 so that way if you are selling hardware breakeven uh you're under 40 for your operating expenses and you're at say 30 percent uh for in expenses for your subscriptions well then at least maybe you've got some money left over to actually turn a profit for shareholders but right now the biggest concern here is a slowdown in the hardware sales which could potentially end up leading to a slowdown in the amount of people signing up for subscriptions for peloton so far we're still seeing good growth and this is exciting i like that we're seeing good growth in the subscription model because it could mean that a lot of people are using the subscription service without actually having uh the peloton hardware which is fine because again the subscription is is much higher margin uh taken 70 ish to the bottom line uh or to the gross profit line rather which is great but again how much in sales and marketing is peloton having to push to get people to sign up for this uh for these subscriptions and is churn going to continue to increase so bottom line does it make sense to invest in peloton in my opinion i'm i'm not enthusiastic about the risks that we have here the risk reward is is skewed for me i do not like that churn is increasing i don't like that advertising efficacy is going down i do like that subscription revenue is is still exploding we still doubled year over year coming out of september of 2020 which is great but there are some serious concerns in terms of how long is that sort of growth going to last is churn going to continue to go up and what's it actually going to cost us to where are we just losing money to try to acquire customers that's the issue because even though we saw a doubling in the subscriptions we also saw a more than doubling in sales and marketing in fact if we take 284 million divided by 114 we uh two and a half x our marketing spend but only 2x are subscriptions so again back to that advertising inefficiency whether they blame apple or it's because the market's saturated and people just aren't interested in pelotons right now i don't know this is not a stock that i'm in it's not a stock that i'm going to buy the dip in um but i maybe play options on it maybe but beyond that maybe selling puts and trying to farm some higher volatility beyond that not a stock i'm interested in these are my thoughts on what's going on with peloton and the stocks in psychology and money group where you learn how to take a look at companies the way i do ] you
댓글 0