Peloton is actually worth eight billion dollars

Peloton shares: recall campaign caused a low point, but good numbers ensure recovery

Foley relented just this week and is now remorseful: "Peloton made a mistake in its initial reaction to the demand from the consumer protection agency to recall the Tread +," he explained, referring to his company's treadmill model. The company should have responded better from the start.

Foley stopped selling the treadmills and now wants to work on the safety of the equipment. Peloton also offers its customers a full refund when they choose to return their treadmills. According to the consumer authority, information is available on more than 70 accidents with children or pets. The popular stationary bikes are not affected by the campaign.

For Foley himself, the fatal accident is probably the toughest test of his career. The New Yorker with an MBA from Harvard Business School and positions as CEO of the online invitation platform Evite and the online trade of the bookstore chain Barnes & Noble founded the company nine years ago. Peloton sells several $ 2,000 bicycles with built-in displays and sells subscription streaming courses. Some of the trainers have real fan bases.

Peloton increased sales 141 percent in the last quarter

Today, Peloton is one of the most famous fitness brands worldwide, and its fans include singer Jennifer Lopez as well as actor Hugh Jackman and Jamaican sprinter Usain Bolt. The German Football Association has also announced a partnership with Peloton.

Since the fitness studios have been closed in many places due to Corona, Peloton has had to work on the supply chain to keep up with the deliveries. In the most recent quarter, Foley increased sales 141 percent to $ 1.26 billion, exceeding analysts' expectations. The loss was also less than expected at $ 8.6 million.

But in the current fourth quarter, Foley expects the problems with the treadmills with a slump in sales and only expects $ 915 million in revenue.

The share price is also now far from its record in January. Nevertheless, investors basically trust the New York company, which has not yet made a profit, and still value it at more than $ 25 billion. On Monday, the Peloton share price climbed by almost two percent in the meantime, despite the recall campaign and also because of the good quarterly figures.

It was not always easy to convince investors, especially at the beginning: "I think the venture capitalists were afraid of the complexity of our business model," Foley told Handelsblatt last year. After all, he didn't just want to use an existing bike and put a screen on it, but rather link the technology more closely and offer streaming courses. He also wanted to manufacture the bikes himself and have them delivered by his own employees.

At the beginning, investors had doubts about the business model

“The venture capitalists asked: What is the market for a $ 2,000 standing bike? And we replied: We are not selling a bike, we are selling an experience with tremendous value, ”said Foley. Failing to convince the venture capitalists, he turned to the crowdfunding community. Using a video with the prototype, he raised almost $ 300,000 on the crowdfunding platform Kickstarter in 2013.

Now, however, Foley doesn't have to convince venture capitalists, but above all its customers. He must convey to them that his devices are safe and do not pose a lethal threat to their relatives or animals.

JP Morgan's Ron Josey is confident that he can succeed: The problems with the treadmills are “a break” and not a lasting setback. The recall of the treadmills is "obviously not a great result," he says. The demand and community that Foley has created among his peloton fans is difficult to copy.

“We think most customers don't actually bring their device back,” explains Josey. "We believe the majority have placed it in a relatively safe place at home."

More:Peloton continues to grow rapidly