Is Peloton Making Money?
Peloton (NASDAQ: PTON) is fast becoming one of the most hated companies in America for its creepy TV advertising campaign.
The New York Times labels a Peloton ad called The Gift That Gives Back “sexist and dystopian.” Feminists hate the ad because it shows a woman trying to please a man. The woman; in a display of 1940s values, gets up early every morning to exercise to “please her husband.”
Personally, I find the ads both creepy and sexist. The ads make Peloton look like a cult and promote horrendous standards of female behavior. Many men will avoid Peloton because they fear Peloton will turn their wife; or partner, into the Peloton Wife.
I have to wonder what century Peloton’s advertising department lives in? Another criticism is that The Gift That Gives Back is “classist.” I cannot understand that criticism but classism is one charge companies need to avoid in U.S. Senator Bernie Sanders’ (I-Vermont) America.
Is Woke Culture a Threat to Business?
Pundits root the criticism of Peloton in common and widespread feminist and woke political ideology.
Yet Peloton’s management did not anticipate it. The Woke Culture Peloton has stirred up is so pervasive that former President Barack Obama (D-Illinois) criticizes it. Candidate Andrew Yang (D-New York) even made the Woke Culture an issue in the presidential race by coming to the defense of fired Saturday Night Live cast member Shane Gillis.
Strangely, Peloton management is unaware of the Woke Culture’s existence or its potential effects on business. Notably, Chick-fil-A; a far larger and more lucrative company than Peloton, surrendered to the Woke Culture in November.
Is Peloton Out of Touch?
To explain, Chick-fil-A stopped giving money to charities that oppose gay marriage because of criticism. The controversial groups Chick-Fil-A was donating to included the Salvation Army.
Does anybody at Peloton use social media, read blogs, read the news, or go online? The Woke Culture is nothing new, and it is a common topic in both the old and new media. Pundits including Rod Dreher, have made careers of attacking the Woke Culture.
I think the lack of awareness of the Woke Culture points to an out of touch management at Peloton (NASDAQ: PTON). After all, there were dozens of ways Peloton could have made its products look attractive in the ads while offending nobody.
Mr. Market is Woke
Investors need to investigate the Woke Culture because Mr. Market is now woke. Business Insider estimates Peloton’s share price fell by 9% and Peloton’s Market Cap fell by $942 million because of the Peloton Wife.
Strangely, Peloton shares rose to $36.84 on 2 December 2019 but fell to 31.28 on 4 December 2019 as the Peloton Wife backlash went viral. News stories about the social media attacks on Peloton began appearing the day before.
Peloton’s share price fell by $1.35 (4.1%) to $31.57 on the morning 5 December 2019 but rose to $34.77 at the close of trading on 9 December 2019. Peloton Interactive (NASDAQ: PLTON) had a market capitalization of $9.754 billion and a share price of $34.77 on 9 December 2019. Those numbers indicate there are still some investors who believe in Peloton.
Is Peloton a Value Investment?
Value investors are interested in Peloton because the company sells its stationary bikes for $2,245.
Each bike has a video screen that shows videos of trainers and bicycle rides to the rider. Peloton claims its sales grew by 110% between 2018 and 2019, CNBC reports.
Additionally Peloton; which has a cult-like following, sells memberships for $39 a month. Theoretically, Peloton could generate large amounts of float from those memberships.
“Float” is Warren Buffett’s term for continuous streams of cash a company can tap at will. Classic examples of float include newspaper and magazine subscriptions, utility bills, insurance premiums, and advertising revenue.
Peloton generates float from the subscriptions. Additionally, Peloton could generate advertising revenue by selling ads on the obnoxious screens.
Does Peloton Make Money?
Unfortunately, Peloton is not making any money from those subscriptions. Peloton reported an operating loss of -$50.8 million and a net loss of -$49.8 million on 30 September 2019.
Moreover, Peloton reported quarterly revenues of $228 million and a quarter gross profit of $105.10 million on 30 September 2019. Therefore, Peloton has little money and minuscule revenues.
Additionally, Peloton reported a negative cash flow of -$76.2 million and a free cash flow of -$98.7 million for the quarter ending on 30 September 2019. However, Peloton reported a financing cash flow of $1.198 billion for that quarter.
Peloton is Borrowing Money to Stay Afloat
I think the financing cash flow shows Peloton borrowed $1.198 billion to finance its operation. Hence, I think Peloton borrowed money to finance the production of the Peloton Wife ads.
Peloton had to borrow that money because its resources are tiny. Peloton had total assets of $2.388 billion and cash and short-term investments of $1.477 billion on 30 September 2019.
Unfortunately, I think Peloton borrowed that cash. Hence, Peloton’s capacity for making money is tiny. Thus, Peloton management makes questionable decisions and borrows money to finance the implementation of those plans.
Peloton is a Terrible Stock
I advise investors to avoid Peloton Interactive (NASDAQ: PLTON) because it is a terrible stock.
I think Peloton is a lousy company. For example, Peloton makes a questionable product competitors can duplicate easily. Moreover, Peloton is an exercise fad and history shows exercise fads fade fast.
Does anybody out there remember Tae Bo, Jazzercize, Bowflex, Roller Blades, or the Thighmaster? I predict Peloton will join those exercise regimes in the answers to future trivia questions.
There is no value at Peloton for investors. Instead, Peloton offers an interesting lesson in the power of Woke Culture and the need to avoid initial public offering (IPO) companies.