Peloton Interactive, Inc. (NASDAQ:), an interactive fitness platform and exercise equipment company based in the United States, recently announced its plans to sell connected fitness equipment to hotel chains.
Peloton looks beyond its current home to find the next stage in growth after a year of turmoil that saw it face numerous lawsuits and investigations from the government. These were in the aftermath of a May voluntary treadmill recall, which was in response to at most 70 injuries and one fatality involving Peloton treadmills.
Popular fitness platform Peloton has invested aggressively in marketing, partnerships, acquisitions, and other activities to keep its position as a market leader in this sector. Peloton stock remains neutral despite promising signs and the high market valuation. (See Peloton stock charts on TipRanks)
Capitalizing on the Reopening of the Economy
Peloton is attempting to expand its business beyond the home fitness market, by making its connected workout equipment under the Precor brand available online for hospitality customers. Following a loss of more than expected in its fiscal fourth quarter, Peloton is now looking to grow its commercial business.
The company completed the $420million acquisition of Precor in April. Precor is a manufacturer and distributor of strength training equipment such as rowers and treadmills.
The company announced that customers who are in the hospitality industry can now order both Precor products and connected exercise equipment through one platform.
Peloton will also work with partners in hotels to deliver exercise sessions to guests, as the travel restrictions that were previously expected are ending sooner than they anticipated. Users are returning to exercise and other outdoor activities after the pandemic, which is a significant boost to company growth.
Peloton has launched a corporate wellness plan to help its customers stay ahead of their competition and keep the company’s growth momentum intact after the Pandemic. Employers who partner with Peloton can opt to have Peloton equipment installed in their offices. To attract new customers, the company reduced its best-selling product’s price.
In addition, the company has been expanding its product line beyond fitness equipment. The company officially debuted its private-label clothing collection, titled Peloton Apparel, on September 9th, after years of cooperation with leading apparel brands such as Nike , Inc. (NYSE:), Adidas AG (DE:) (ADDYY (OTC:)), and Lululemon Athletica Inc. (NASDAQ:).
Peloton has also released a videogame in which the connected bike acts as the controller. Lanebreak is an app video game that Peloton announced in July. This challenges riders with matching and maintaining their resistance according to the tablet’s indications to get the best score. The scores can be compared to others. This rhythm-based game sees obstacles moving in accordance with the music. Only Peloton subscribers and owners of a Peloton bicycle can access Lanebreak.
It also announced a wristband that measures your heartbeat, which is its first venture into wearable technology.
Wall Street’s Take
Based on the ratings of 22 analysts offering 12-month price targets, the average Peloton Interactive price target is $130.10, which implies upside of 40.4% from the current market price.
Peloton stock trades with a reasonable margin of safety as per analysts ratings. Investors might have to be patient and wait for Peloton to start delivering the goods. The company will need to overcome many obstacles in the post-pandemic period, when mobility restrictions no longer exist.
Peloton is now positioning itself to benefit from the recovering economy, after benefiting from a surge in demand for home-fitness equipment due to pandemic-related restrictions. It seems prudent to partner with the hospitality industry, as the sector will recover rapidly in the next months.
Peloton gained manufacturing capability in the United States through Precor’s acquisition. The company also expanded its client base to include universities, health clubs and hotels.
Peloton is certainly moving in the right direction. However, its high valuation could cause growth investors to leave the company.
Dilantha De Silva didn’t hold any position in the securities discussed in this article at the time it was published.
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