This case considers approaches to valuing Peloton Interactive, Inc. (NASDAQ: PTON), a manufacturer of home fitness products including bicycles, treadmills, and connected fitness subscriptions. In this case, Bainbridge Capital, a USD 540 million assets under management (AUM) investment fund, invested USD 4.3 million to acquire shares in Peloton’s initial public offering in September 2019. Less than a year later, in September 2020, sales of Peloton bikes and subscriptions have risen strongly, as fitness enthusiasts are forced into working out from home. The shares of Peloton have skyrocketed, more than doubling from their initial public offering price.
Lauren Truxton, an analyst at Bainbridge, is being asked to make a recommendation on whether the current valuation of the firm is sustainable, or is a temporary result of the Covid-19 shutdown that will reverse once gyms and fitness centers reopen. She needs to select an appropriate valuation methodology, considering not just the short history of the firm as a public company, but also the extreme market volatility as a result of the pandemic. Based on her analysis, Bainbridge will need to decide whether to sell their shares for a sizable capital gain or stay in the stock for the long term.