Peloton stock looked a little out of shape by the end of its first day of trading.
Shares of Peloton (PTON) - Get Report , which opened at $27 on the Nasdaq exchange on Thursday, closed at $25.98, well below its IPO price of $29 per share. Nonetheless, Peloton president William Lynch believes that the market will appreciate the positives in the company's outlook in the weeks ahead, and that the funds raised in today's IPO will help Peloton ramp up its growth.
"This was primarily a fundraising event for the company -- we've got $1.4 billion on the balance sheet," Lynch told TheStreet in an interview.
Peloton sells both high-end fitness equipment and a range of digital workout subscriptions. In its IPO prospectus, Peloton touted its growing and loyal membership base, which includes 511,202 "connected subscribers" with a paid subscription. It also noted a 95% retention rate for "connected fitness" services.
While its revenues are growing at a healthy clip, Peloton also loses a not-insignificant amount of money -- it posted a $245.7 million net loss on $915 million in revenue for 2019 compared to a loss of $47.9 million the prior year.
Lynch acknowledged that the market appears less favorable to unprofitable companies right now, but emphasized that the opportunities for category and geographic expansion bode well for Peloton over time.
"This is a $4 trillion category; it's a big market ... we're really well-positioned to drive profitability over time," he said.
Among the critiques of Peloton -- and of fitness businesses in general -- are that workout programs can be "faddish" and, in Peloton's case, the connected fitness category is new and unproven.
"There are a lot of good things about Peloton -- they've got high-margin hardware products that they've persuaded consumers to buy, and they've got high-margin software that may hold the hope of getting consumers to stay the course in their exercise regime," added John Mullins, associate professor of management practice in entrepreneurship at London Business School.
Many forms of workout equipment have not stood the test of time (NordicTrack, anyone?), so the question is whether Peloton can avoid the fate of so many at-home workout regimes before it: "Consumers buy them at various price points, use them for awhile, and eventually they wind up on eBay," Mullins said.
For its part, Peloton plans to add thousands of new workouts in the coming months, and has expanded recently into new areas of wellness such as yoga and meditation.
That will keep its member base coming back for more over the long term according to Lynch.
"If you look at our members, those members are working out more today than they were when they started," he said. "Our members can expect continued innovation from us."
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