The home fitness industry is booming... for now.
Home fitness has seen a surge in attention due to the pandemic.
As the nationwide lockdown began in March, businesses - including gyms - closed their doors across the country. And this led to a consumer shift, as a wave of people started to look at and explore the home fitness world.
And many eyes have been on Peloton Interactive Inc. (NASDAQ: PTON).
Peloton, a trendy home fitness company, has become a household name over the past few years. From its stationary bikes to its versatile workout app, the company's popularity has skyrocketed during the pandemic - and in turn, so has its stock.
PTON shares are up more than 120% this year, thanks to a surge in sales for its bikes and treadmills, and for a while, it seemed as if the trend would continue.
But now, a competitor has stepped into the ring, and investors wonder if PTON can put up an equal fight. I don't think it's worth your time to wait and see if it will or not. Here's what you should do instead to make money right now...
PTON Can't Win This Race: Where's the Money?
It may surprise you to know that Peloton's competitor is none other than Apple Inc. (NASDAQ: AAPL).
In a recent announcement, it was revealed that Apple is working on a subscription project that would offer fitness classes, streamed directly to users' Apple devices. The layout of the plan is aiming to mimic products from Peloton, Nike, and Les Mills in the sense that it offers streaming classes for a monthly fee.
And that's just scratching the surface of what Apple can do.
The company is currently working on what it calls "Apple One." This is going to be a mix of bundles that'll allow people to subscribe to its multiple subscription services at a lower monthly price than buying each service separately
This news immediately spooked investors, and we saw the stock drop 4%. But here's what I think about this current home fitness trend...
Now I've been saying this for a while, but I think PTON rose too quickly too fast. And I believe it can't go much higher than the surge that we already saw.
Let's take a quick look at the numbers. In June 2017, revenue sat at $218.6 million, and by June 2019, it was around $915 million. Recently, over the last 12 months, the company reported $1.4 billion in revenue. On top of this, both subscription and equipment sales have nearly doubled every single year.
But despite these impressive numbers, PTON's net margin is sitting at -14% during the last 12 months. And it makes sense that as the company grows, so does its total operating expenses. However, this net margin is waving a red flag for me.
On top of this, gyms across the country are reopening, and people are itching to return to normal life. That's why I believe we will see a shift out of the at-home fitness industry soon.
And that's precisely why I would advise investing in AAPL over PTON any day of the week. Apple offers an arsenal of versatile products, and once we see a shift away from home fitness, Apple has many other products to keep the income flowing. Peloton, on the other hand, does not.
One More Point...
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About the Author
Andrew Keene is a globally known trader and a renowned expert on all things options.