Peloton Working on New Subscription Plan for Bike and Content

Peloton (PTON) is testing a new single monthly subscription plan for its standard bike, which costs $1,495. Bloomberg reports that the new plan will not require users to pay for the hardware upfront. PTON shares fell 3.54% to close at $22.61 on March 10.

Peloton is an exercise and media company that offers interactive fitness products such as the “Peloton Bike” and the “Peloton Tread” for live and on-demand fitness training.

Rental Plan

The new plan will initially be tested in retail stores in nine locations across Florida, Denver, Minnesota, and Houston and will allow access to the content subscription, which offers a range of live and on-demand exercise classes, and usually costs $39 a month. According to Bloomberg, the combined hardware and content subscription will cost between $60 and $100 a month.

Initially, Peloton will limit the number of people who can sign-up for the program. In addition, people who had an all-access subscription last year cannot sign-up for the program. Members participating in the 30-day or 100-day home bike trial are also barred.

The new monthly subscription strategy is similar to the one deployed for inkjet printers, where the focus is on refilling cartridges rather than selling printers.

Separately, Peloton has expanded its management team with Andrew Rendich assuming the Chief Supply Chain Officer role and Shari Eaton promoted to Chief People Officer.

Stock Rating

Last month, MKM Partners analyst Rohit Kulkarni reiterated a Hold rating on the stock and raised the price target to $35 from $30, implying 54.80% upside potential to current levels. According to the analyst, the new Peloton President & CEO Barry McCarthy boasts an impressive record of creating shareholder value. In addition, the at-home connected fitness market presents a larger opportunity in the “new normal.”

Consensus among analysts is a Moderate Buy based on 13 Buys, 9 Holds, and 1 Sell. The average Peloton price target of $47.19 implies 108.71% upside potential to current levels.

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