Weighing Peloton’s opportunity and risks ahead of IPO

Exercise tech company Peloton filed confidentially for IPO this week, and already the big question is whether their last private valuation at $4 billion might be too rich for the appetites of public market investors. Here’s a breakdown of the pros and cons leading up to the as-yet revealed market debut date.

Risk factors

The biggest thing to pay attention to when it comes time for Peloton to actually pull back the curtains and provide some more detailed info about its customers in its S-1. To date, all we really know is that Peloton has “more than 1 million users,” and that’s including both users of its hardware and subscribers to its software.

The mix is important – how many of these are actually generating recurring revenue (vs. one-time hardware sales) will be a key gauge. MRR is probably going to be more important to prospective investors when compared with single-purchases of Peloton’s hardware, even with its premium pricing of around $2,000 for the bike and about $4,000 for the treadmill. Peloton CEO John Foley even said last year that bike sales went up when the startup increased prices.

Hardware numbers are not entirely distinct from subscriber revenue, however: Per month pricing is actually higher with Peloton’s hardware than without, at $39 per month with either the treadmill or the bike, and $19.49 per month for just the digital subscription for iOS, Android and web on its own.

That makes sense when you consider that its classes are mostly tailored to this, and that it can create new content from its live classes which occur in person in New York, and then are recast on-demand to its users (which is a low-cost production and distribution model for content that always feels fresh to users).