- Peloton benefits from expanding health and wellness industry, high sales growth

- Offers unique scalable subscription approach, but faces wall of increasing competition

- Numerous concerns: high product prices; sharply rising costs; material weakness

Peloton Interactive (PTON) shares are likely to be priced tonight, between $26 and $29 each, for a market cap of around $7.5 billion. The “connected fitness” firm is a fast growing and ambitious purveyor of gym equipment—with a twist. After buying their relatively expensive stationary bikes and treadmills ($2,245 and $4,295, respectively) the consumer subscribes, for $39 per month, to PTON’s unique and wide array of live training and workout streaming videos and classes, and to its vast library.

It’s a virtual gym and one of the big benefits is home access to workouts with some of the best-known fitness instructors. You don’t have to drag yourself down to a smelly, crowded gym. Moreover, the health/wellness industry is growing about 5% per year in the U.S. In its SEC filing, PTON says five million treadmills and three million stationary bikes were purchased in the US in the 12 months ended March, 2019.

PTON’s growth reflects that. In its fiscal year ended last June, revenue soared 100% to $915 millio...

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