Peloton Powers Forward with Nasdaq IPO

Peloton energized public markets on Thursday, listing on the Nasdaq Global Select Market with the stock ticker symbol PTON.

Founded in 2012, Peloton is among the leaders in the smart home fitness revolution, providing an interactive fitness program to 1.4 million members through its sales fitness machines, such as exercise bikes and treadmills, as well as monthly subscription plans with access to a variety of classes and instructors.

“Peloton is so much more than a Bike — we believe we have the opportunity to create one of the most innovative global technology platforms of our time. It is an opportunity to create one of the most important and influential interactive media companies in the world; a media company that changes lives, inspires greatness, and unites people,” John Foley, co-founder and chief executive officer at Peloton, wrote in a letter included with the IPO prospectus filed with the U.S. Securities and Exchange Commission.

Peloton priced its IPO at $29 per share, which would raise over $1 billion. The company said it would use the proceeds from the offering to enhance its operations and invest in technologies and infrastructure.

Peloton has played an integral part in the smart home fitness revolution, as many users were quick to adopt the platform. The company’s classes are a form of “exertainment,” an engaging style of exercise and entertainment, Vicki Reed, a former head of marketing at Peloton, told The New York Times.

The interactive fitness company disclosed that it has about 577,000 Connected Fitness Products, with approximately 564,000 in the U.S, but sees plenty of room to run. Peloton believes that its Serviceable Addressable Market (SAM) is 14 million Connected Fitness Products, with 12 million in the U.S. alone. According to the company’s research, its Total Addressable Market (TAM) is 67 million households, of which 45 million are in the U.S., and estimates that 52 million households are interested in learning more about its Connected Fitness Products without seeing the price.

Peloton’s growth is reflected in its surging market share, which has increased from 6% in fiscal year 2017 to 22% in 2019, according to research firm D.A. Davidson.

In fiscal year 2019, Peloton earned total revenue of $915.0 million, representing 110.3% year-over-year growth. As it grows rapidly, the company has not shied away from spending on G&A expenses as well as sales and marketing. While the company noted on its IPO roadshow that it expects to be profitable in five years, D.A. Davidson thinks profitability might be three to four years away.

“The company already has a fairly robust gross margin, which could work higher over time,” wrote D.A. Davidson analyst Michael Kawamoto. “We believe that PTON will need to maintain its very healthy topline growth rate while making steady margin improvements to keep its robust valuation.”

“I believe in the coming decade, we will become one of these very celebrated tech companies that’s on the level of Amazon, Apple, Facebook and Google – we want to be the fifth,” Foley said in a 2017 interview with Nasdaq’s Cultural Capital series.   

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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