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The share price of Peloton Interactive, Inc. (NASDAQ: PTON) fell sharply (approximately 16% in total) on December 9th and 10th due to the fact that the company and its fitness equipment appeared to be at night on the fictitious US cable television An unpleasant description appeared in the series on December 8. Normally, this overreaction creates buying opportunities for stocks, but in this case, given that people in the American fitness industry tend to go to the gym, and in this case, Peloton's valuation seems to be expanding. In short, despite the risk of an epidemic that is still raging, people are clearly tired of exercising at home.

According to brokerage firm Jefferies, gym visits in early October fell by only 8% compared to the same period before the fall of 2019 pandemic. This attitude is in sharp contrast to the situation in 2020. For example, in the spring last year, OriGym, a fitness training company, reported that search terms such as "home exercise, home fitness equipment, and bodyweight exercise" showed a 500-600% increase. 

More specifically, Planet Fitness, Inc. (NYSE: PLNT), a global fitness center chain with 2,200 gyms, reported in early November that its revenue for the third quarter of 2021 increased by 46 compared to the same period last year. %. In addition, Planet Fitness CEO Christopher Rondeau (Christopher Rondeau) reported that its current total membership number exceeds 15 million, accounting for 97% of its pre-pandemic historical peak. Peloton's own statistics seem to confirm this: Compared to the period ending March 31, 2021, the number of Peloton Connected Fitness exercises for the quarter ended September 30, 2021 dropped by nearly 20% to 120,515.

Perhaps even more worrying is that the percentage change in retail sales of home fitness equipment may have recently passed a critical negative inflection point. Market research company NPD Group reported that compared with the same period in 2020, the retail sales of home fitness equipment in the first eight months of 2021 increased by 20%, but declined in the narrow three months ending August 31, 2021 5%. The three months ended August 31, 2020. In fact, the Wall Street Journal reported that the waiting time for delivery of Peleton exercise bikes has returned to the normal range before the pandemic, that is, 1 to 3 weeks, which is lower than the peak of more than 10 weeks. In 2020, the total number of home fitness equipment in the United States The market size is approximately US$3.7 billion.

Peloton's $12.5 billion enterprise value is equivalent to about 2.7 times its estimated revenue for the 2022 fiscal year. (The 2022 fiscal year ends on September 30, 2022.) The company lowered the median revenue guidance for the 2022 fiscal year to $4.6 billion from $5.4 billion in early November. In the previous period, before the guidance cuts, an income multiple of 2.7 times seemed attractive.

However, if the company is to reach the midpoint of its estimated revenue of $4.6 billion in fiscal year 2022 (given the above points, this seems far from certain), this means that revenue will only increase from the $4.07 billion in revenue achieved in fiscal year 1213 %. The month ending September 30, 2021. Attaching a 2.7 times income multiple to such a declining growth rate may be a too high number.

In the context of slowing growth, it is equally difficult to predict how the stock market should evaluate the company’s projected cash flow deficit.​​​ For the twelve months ending September 30, 2021, Peloton's adjusted EBITDA loss was US$98.7 million. It is now expected that this gap will be 4.5 times that number for the twelve-month period ending June 30, 2022.

Of course, investors may decide in time that Peloton's growth slowdown is short-term in nature, and that the company should trade at a multiple that is closer to its previous and more active valuation. In addition, as of November 30, 2021, approximately 10% of the company's outstanding shares were short-sold (according to Yahoo Finance), which may prompt investors inspired by Reddit to decide that Peloton is a memetic stock.

The changing attitudes of fitness enthusiasts are putting pressure on Peloton. Data showing clear evidence that members return to local gyms may indicate that achieving the recently reduced revenue for fiscal year 2022 may be difficult. Even after falling by about 70% in the past five months, Peloton's stock does not appear to be cheap based on projected near-term income or cash flow.

Peloton Interactive, Inc.'s last transaction price on Nasdaq was $40.72.

The information in this briefing was found through Edgar and the mentioned companies. The author has no securities or affiliations related to the organization. It is not recommended to buy or sell. Before buying securities, be sure to conduct additional research and consult professionals. The author does not have a license.

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