Peloton (NASDAQ:PTON) has enjoyed a staggering run of success in recent months, as it's become the go-to source for exercising at home. Back in a time when gyms were closed, and people desperately wanted to avoid both crowds of people and gaining weight in a big way, Peloton looked like the go-to answer for such a problem. That left Peloton seriously behind on orders, but new moves in production look like they may have addressed that problem.
Peloton Puts on Extra Steam in Production, and More
Peloton rose to the challenge of getting its exercise bikes out to customers by ramping up its production twice; back in September, the company doubled its available production count. Now, word from company CEO John Foley says that, over the past year, the company ramped up its production by a total of 700%, which actually puts supply at a point where it's “close to meeting demand,” reports noted.
While that may sound a little unsettling in its own right, Peloton has not simply bolstered its production capabilities for exercise bikes. The company has been actively pursuing new product lines, including branded apparel. Word from Foley noted that, just in the last quarter, the company has sold over 600,000 pieces of branded apparel, and word has recently emerged about a new partnership with Adidas (OTCMKTS:ADDYY) that will put more apparel issues in play.
The Analyst Pool is Spinning Its Wheels
Meanwhile, word from the broader analyst pool—as based on our latest research—reveals that there's quite a bit of interest in Peloton still going on. The company has had a consensus “buy” rating on it for the last six months, and the ratios comprising that “buy” have shifted very little in that time.
Six months ago, the company had one “sell” rating, three “hold” and 25 “buy” ratings to its credit. That slipped a bit toward bearish three months ago, as it had one “sell”, three “hold” and 23 “buy” ratings. A further dip toward bearish arrived a month ago, as the company gained a “sell” rating, but today, bullishness has returned as the ratio stands at two “sell”, two “hold” and 24 “buy”.
The price target, meanwhile, has made rapid gains in the last six months, but may be approaching a plateau. Six months ago, the price target stood at $97.08, and then leapt to $124.89 three months ago. A month ago, another jump hit for the company and the target increased to $147.54. Today, the price target stands at $150.39, which may seem a bit optimistic given that the company currently sells at $105.94 as of this writing.
Fighting the Last War, or Preparing to Branch Out?
There's an old saying: “Generals always prepare to fight the last war.” Basically, this means that everyone gets ready to address conditions that most recently appeared; Peloton, for example, is ramping up to meet demand that it saw this time last year. That could be a problem for the company, as last year featured nearly-universal gym closures, while this year features them re-opening on a fairly broad scale.
While there's certainly still demand, and likely will be for some time to come—plenty of people will be willing to stay out of gyms to exercise—the odds that Peloton demand will be as high as it was last year are fairly low. Additionally, Peloton has to consider the growing body of competitors out there who have discovered the massive demand for Peloton and are rushing to meet it; Myx Fitness was recently seen offering substantial discounts on its own model, which is markedly similar to Peloton.
However, if there's one thing we know about Peloton, it's that the company is big on innovation. We've seen this several times before; the company is actively pushing toward a goal of 100 million subscribers for its streaming services. The new deal between itself and Adidas is another point. It's been spotted working with celebrities like Beyonce Knowles in a bid to drive more interest. We also know that Peloton has very dedicated customers; that works positively in Peloton's favor, as it builds word-of-mouth advertising, some of the most effective there is.
With Peloton looking to branch out into other countries—the company recently launched Peloton Tread in the UK, and is planning to hit the Australian market soon—some additional production could be useful. Better yet, if Peloton starts developing new bikes, having that production capacity on hand to meet that potential demand could be crucial to the company going forward. While it may have launched a huge new uptick in production too late to satisfy yesterday's demand, and fight the last war, that production may serve it well going forward, making Peloton well worth considering as an investment.
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