Long $CULTS – On Peloton

Peloton makes no sense to me. The business model is boring, essentially a hardware company pretending to be SaaS. You pay $2k+ for an exercise bike, then even more to stream the classes. It’s stupid expensive. Personally, I have no interest in the product given the price. It’s just not rational, but that is because it’s a cult. 

Some might say this is just a brand. I choose to call it a cult, because Peloton users and investors seem especially fervent in defending Peloton. Really its a cult brand, but calling it a cult is more fun.

Below are a few examples of other cults:

• Apple – try to tell an artist to use windows
• Nike – they charge how much for shoes?
• Tesla – Elon is a wizard!

Cult brands make money. You overpay because its a cult. You don’t even consider other options. Cults are the ultimate form of pricing power.

The returns on cults are significant. Obviously these companies are more than just cult brands, but if I squint, I see similarities with Peloton. On top of all of this, the growth is great (172% YoY) and the valuation is reasonable-ish given growth ($26B market cap).

Should I be owning stock in a company that makes no sense to me? Probably not. However, I see a young cult in the making and am ready to experiment. 

Long $pton because cult.