I know valuing Peloton at over $49 billion at the height of the pandemic was sheer absurdity, and a correction at some point was almost inevitable. But valuing Peloton at its current $8 billion valuation seems somehow more absurd.
Peloton's brand by itself is worth $8 billion. When I think of amazing brands in fitness right now, I think of Nike, I think of lululemon, and I think of Peloton. Peloton is a status symbol; apartments and hotel complexes advertise loudly that they have Pelotons because they know it gives their entire complex a certain aura of prestige. Only certified beasts own them. Every time you meet somehow on a Zoom call that absolutely slays their job, you will also spot a Peloton lingering in the background of their living room and think, "Well, that adds up." So many brands would shell over $8 billion just to reach that same level of brand prestige and capture that same high-achieving customer base. Don't underestimate the power of this brand image; valuations can crater, but brand reputations generally do not fade fast.
Not all great products have great brands built around them, but I think it's always true that all great brands must have great products behind them, and Peloton makes amazing products. Have you ever talked to or heard from someone who was unhappy with their Peloton? Not only is it the fitness machine-of-choice for certified beasts, but these people also absolutely adore their bikes. We can debate all day about the incremental value consumers are actually getting from their Peloton bikes relative to a standard exercise bike or whether or not the membership fee is too high or whether or not the shift to home gyms will remain an explicitly pandemic-era change. But at the end of the day, Peloton is a widely admired brand that makes high-quality, innovative products that their customers adore. Many companies would pay $8 billion just for the privilege of saying that statement without a laugh. As long as that's true, I don't think the sun will set on Peloton.
I think the next steps here are easy. Peloton is going to be acquired by Apple or Nike. The brand images are just too complimentary, and getting that extra share of customers' attention is always valuable. Even at Peloton's peak, Apple could have bought Peloton with only pocket change. Now the acquisition just seems like a no-brainer for them. But until then, I will continue watching the stock tumble day-in and day-out, wondering why we're selling one of the greatest brands in the last five years at Dollar Tree prices.
Comments