Yesterday, after the news of Peloton’s Bike+ and lower cost tread was announced, Jim Cramer said that Peloton would be “way too high” if the economy were to open. He’s wrong, and let me explain why.
When asked if Peloton can continue the momentum and if he’d consider the new Bike+, he had this to say:
I have my own gym, so I don’t need the bike. I have a trainer.Jim Cramer
He later goes on to mention that gyms have been the hardest hit of any sector besides restaurants. He also said that if the economy were to open, the stock would be way too high, and it could lose its luster once there is a COVID-19 vaccine and people can freely go back to gyms.
I disagree with his rationale, and it’s clear that he doesn’t understand the benefits of Peloton or connected fitness in general. People who have invested in a Peloton product don’t want to go back to gyms, can’t afford to build one, or hire a personal trainer. People went to the gym because they had the equipment they didn’t have at home. COVD-19 is changing that. Thanks to fitness apps, we have no need for in-person classes. Thanks for products like JAXJOX, we will have no need for a dumbbell rack.
Peloton is also creating a “moat” around its brand, similar to how Apple did with consumer electronics and Tesla has with electric vehicles. For much of the developed world, Peloton is connected fitness. Connected fitness is the future of fitness.
It’s this reason I am very excited about the JAXJOX dumbbells, the smaller Peloton tread, and the lower-cost Peloton bike. Some would argue that fitness bikes that are $1,800 aren’t affordable for everyone, and I agree with that. I believe in the future Peloton will offer a lease program for $99/month that includes a Bike and the monthly subscription. When this happens, Peloton will be at the same price point as Orange Theory, but in a much more convenient package. With the addition of the new Boot Camps, it’s clear Peloton is moving into a “whole body” workout mind-set. It’s no longer just about cardio.
I was explaining to someone today about the time saved with Peloton each day actually gives me time to work out. Instead of driving somewhere to ride a bike, I just clip in and take off in my home. Instead of driving 15 minutes each way to the gym, I can take a half-hour class in what used to just be my travel time. I don’t need a personal trainer to design a routine for me. I can let AI from a fitness app learn how I work out and adjust my routine to meet my goals.
Peloton also gives me back my most valuable resource: time. With that time, I am able to get in a quick workout before work each day so I can spend my evenings with my family. An open economy doesn’t change that. I ride with Peloton out of love for being at home, not having to worry about the weather, temperature, or time of day. Whenever I have a spare 20 minutes, I know that my favorite instructors will be there waiting.
Peloton’s biggest problem in the near term isn’t an open economy, it’s figuring out how to deliver all the products people are ordering. Jim Cramer is wrong. A closed economy showed people the benefits of connected fitness at home, and an open economy won’t change that. Connected fitness is here to stay. Gyms aren’t going to die, but they’re going to end up like music stores in terms of relevance. The days of mass appeal are over.