Peloton is Netflix, Apple, and Casper all in one

Wednesday, August 28, 2019 by Robinhood Snacks | Disclosures

The plot for Peloton's IPO, in 1 picture

Dow Jones
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$10,142 (-1.08%)
10-Yr US Treasury

Hey Snackers,

Bold move. Doritos' new ads don't even include a logo.

Markets were busy dipping Tuesday as investors aren't convinced that trade war negotiations are going anywhere.

1. Peloton takes off its bike shorts to show off its pre-IPO financials

Founded by a New Yorker annoyed by sold-out spin classes... Now Peloton is almost a publicly traded stock. The at-home fitness company trying to crush gyms (and hammies) just revealed its S-1 — that's the tell-all document every company must issue before its IPO (read the thing here). The highlight was the numbers:

  • Bike-powered revenues were $915M last year.
  • But costs were way more — especially the marketing splurge on those Jay-Z soundtracked commercials, leading to a loss of $196M.

For thousands of $$$, Peloton instructors will yell at you... from the comfort of your own basement. Here's the value prop, which has converted 613K spinners to become Pelotonians/Pelotonistas.

  • Really expensive equipment: A $2,245 indoor bike or a $4,295 treadmill, both with HD touchscreens. Perfect reach wedding registry item.
  • Pricey monthly subscription: $39/month for streaming fitness classes, taught by super fit, probably good-looking instructors with Instagram-toned muscles.
  • Once a Pelotoner, always a Pelotoner: Only 0.65% of its monthly subscribers cancel each month. That's loyalty.

This is all the trends in one hill climb... Peloton thinks there are enough high-income earners craving abs and time by exercising at home. That's earned it a $4B valuation in the private market. Once it IPOs, regular investors have a chance to own shares of this Franken-monster of business models. Here's what Peloton's like:

  • Netflix: Peloton is a media company with a library of original content.
  • Apple: Peloton makes beautifully-designed hardware that's top-shelf price.
  • Casper: Peloton sells directly to consumers, with 74 of its own retail showrooms.

Second time's a charm... Altria and Philip Morris International both sell Marlboro cigarettes. Altria's got dibs on the US market and Philip covers the rest of the world. They used to be the same company, then they split, now they confirmed they're trying to merge again. Here's the relationship timeline.

  • 1998: The tobacco companies settled with 46 states plus DC for $246B for the health damages they helped create. That's. A lot. Of money.
  • 2008: Fearing another lawsuit, Altria split off Philip and gave it a foreign passport — that shielded PMI from American lawsuits and anti-smoking legislation.
  • Now: With tobacco sales declining globally (except some developing markets) the two want to move back in to save money. Picture that couple paying $2K each for studios in TriBeCa. Shares fell for both companies on the uninspiring news that it's just a practical move.

Tobacco's not even worth suing anymore... Health worries had already crushed cigarette growth — now existing smokers are gravitating toward e-cigs and cannabis.

  • Altria's sales are 35% lower than ten years ago.
  • PMI's have dropped 10% over the same decade.

Need milk... J. M. Smucker dropped 8%, making it the worst-performing stock in the S&P 500 yesterday. The 4-generation, 122-year-old company is grumpy about 1 product: peanut butter.

"Choosy moms choose Jif"... Now they choose humanely-raised alt-nut options. Sales of peanut butter and Smucker's other headline jam/jelly/butter foods fell 6% last quarter — the company is blaming grocery stores, which are cutting PB prices. But those retailers are discounting for 2 reasons:

  1. Gotta compete: With Amazon pushing harder into food and Walmart already America's biggest grocer, grocery stores are slashing prices to keep win customers.
  2. The rise of the anti-peanut butters: Almond. Macadamia. Cashew with a little cinnamon swirl. More expensive fancy butters are encroaching on peanut butter's bread real estate.

We need to redefine food “staples”... A staple = “Eaten routinely and in such quantities that it constitutes a dominant portion of a standard diet.” Peanut butter has always been one. And Jif was the staple food's staple brand. But as consumers upgrade their spreads and retailers downgrade prices, old school "staples" like Jif are losing their staple "status."

What else we’re Snackin’
  • IM: Instagram is testing out a standalone message service called "Threads"
  • Newbie: Papa John's adds a new CEO — the former head of Arby's
  • 1-Star: Uber exec Anthony Levandowski was indicted for allegedly stealing 14K confidential files when he left Google's self-driving unit, Waymo
  • Coworkers: WeWork acquires rival Spacious, which pioneered coworking in empty restaurants
  • StreamWars: Roku is apparently growing faster than Netflix when it was at this stage
  • Settle: Purdue Pharma offers $10B-$12B to settle opioid lawsuits after the first case in the crisis just ended with a $572M payout for Johnson & Johnson
Snacks Daily Podcast
  • The police had to show up there was a 3-hour wait just to park. That was Costco's 1st day in China — and the stock rose 5% on the passion.


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