Peloton's disastrous month doesn't mean the future of at-home fitness is dead, analysts say

Home fitness equipment sales, excluding Peloton bikes and treadmills, amounted to $3.3 billion between January and November 2021, the NPD Group found.

• Wall Street analysts don't think Peloton's struggles spell the end of the at-home fitness industry.
• Peloton's upcoming earnings could show promise in its digital subscription product.
• Home fitness equipment, excluding Peloton products, saw $3.3 billion in sales between January and November 2021.

Peloton had a disastrous month — but industry analysts don't believe the drama foreshadows the end of the at-home fitness craze.

After Peloton stock soared 440% in 2020 and the company struggled to meet demand, Peloton stock plummeted below its 2019 IPO price on January 20.

CNBC reported the company saw "significant reduction" in demand for its products and would halt production of its exercise bike for two months. Peloton CEO John Foley denied that Peloton planned to halt production on new bikes and treadmills in a letter to employees. 

Peloton's digital subscriptions could reveal true health of the company

Peloton's struggles could suggest more Americans are leaving their homes to exercise. Online searches for "gyms near me" jumped in mid 2021, and Planet Fitness recently announced plans to buy more gyms in the hope that more Americans want to get back to in-person fitness.

In May 2021, IBIS World researchers predicted fitness manufacturing industry revenue to increase at an annual rate of 1.4% to $2.1 billion over the next five years. But part of the growth stems from a projected rise in the gym and fitness club industry, which would allow gym owners to buy higher quality, domestic products.

But luckily for Peloton, the company does not depend only on hardware sales to grow its overall business: Peloton's digital subscriptions — which give users access to a library of live and on-demand workout classes, including yoga, strength training, boxing, and more — make up two-thirds of the company's revenue, according to Kenneth Leon, a research director at CFRA Research.

Analysts from Raymond James said demand for Peloton hardware will likely continue to soften, but they expect "more color" on Peloton's subscription service from its upcoming February earnings call.

Analysts are still bullish on at-home fitness and digital health

Equipment has always acted as a way to get the customer entrenched in the product and service, CFRA's Leon said. He added it's too early to say whether Peloton's disastrous month will impact the at-home fitness market as a whole. 

"It's still a nascent market that's growing: health and wellbeing," he added.

The landscape for at-home fitness and digital health companies is still promising, as home fitness equipment sales, excluding Peloton bikes and treadmills, amounted to $3.3 billion between January and November 2021, according to the NPD Group, accounting for 97% growth when compared with the same period in 2019. 

Leon said large tech companies could be drivers of the growth in digital health and fitness. Facebook is reportedly working on a smartwatch and Apple has continued to build out its Fitness Plus service. 

Top health and biotech investors recently told Insider funding for digital health companies could bring in $20 billion in 2022. Investors were particularly optimistic about startups involving mental health, personal health tracking, maternal wellbeing, and care delivery innovation.

"Who dominates the market remains to be seen," Leon said.