The stay-at-home trend has been very good news for Peloton (NASDAQ: PTON) shares.
The stationary bike and at-home fitness classes company’s shares have gained more than 380% in 2020 and have surged nearly 31% in just the last month alone as some states reimposed COVID-19 restrictions amid rising cases across the U.S.
Needham analyst Laura Martin boosted her price target on the stock from $125 to $140 earlier this month arguing the company is likely to hit 1.6 million active accounts by the end of this year.
“Work-out facilities have been closed in large buildings for most of 2020, which has added new purchasers for PTON’s hardware. PTON’s fastest growing demo has been under 30-year olds. Also, fitness-oriented consumers are generally more focused on their health, implying they will be slowest to return to indoor gyms with shared spaces and equipment,” Martin said in a note. “The game is PTON’s to lose.”
But Strategic Wealth Partners’ Mark Tepper argues 2021 could see a change of the guard, even with the timing of reopening still up in the air.
“As I look forward to 2021, I would begin to look to rotate out of Peloton into Planet Fitness (NYSE: PLNT),” Tepper said. “I’m not doing it today, not at this price. I get really interested in Planet Fitness in the low $60s.”
Planet Fitness shares are currently trading at $74.70, and another wave of lockdowns across the nation could very well push the stock back to the low $60s.
“It was between $50 and $65 all summer long while gyms were open,” Tepper said. “I’ve always loved this company, I just haven’t been able to get in at the right price.”
“First things first, it is a unit growth story,” Tepper continued. “So, they have the opportunity to further penetrate their market by continuing to open new locations. Second thing is their subscription model is absolutely genius. At $10 a month, it’s actually more painful to cancel your membership than it is to just keep paying them.”
Tepper joked that while he owns a Peloton bike, he’d “consider paying $10 a month at this point for the opportunity to get out of my house.”
“I’m not pulling the trigger on this trade yet,” Tepper concluded. “But I am watching it.”
Still, Peloton shares could still have room to run higher. That’s according to TradingAnalysis.com founder Todd Gordon.
“It’s trading 300 times next year’s earnings, but they are spending a lot right now to grow, so I’m not overly concerned about that,” Gordon said, adding that he was “impressed” with how the company has handled the news about Apple’s (NASDAQ: AAPL) new competing exercise class subscription service.
“We actually don’t see resistance until about $200,” Gordon said, pointing to Peloton’s chart. “Peloton was the first that capitalized on sort of this social networking, digital environment, where a lot of other exercise and these kind of experience companies have failed. You look at Lululemon’s (NASDAQ: LULU) acquisition of Mirror and I don’t see it gaining much momentum. I think the popularity of cycling is increasing. …I think a lot of people are sort of getting away from impact exercise.”
Gordon added that at somewhere between $2,000 to $3,000 per cycle, “it’s kind of hard to get away” from Peloton once you’ve purchased one of their bikes. Still, “I’m going to stick with it for now, but I hear Tepper’s cautiousness going forward,” Gordon said.