Do new habits die hard? We know old habits sure do. But the pandemic has tested logic and proportion and we no longer can just hope that what has been working for almost a full year is going to continue to do so.
That's what struck me Thursday night when I listened to the call of Peloton Interactive (PTON) , the software as a service subscription exercise company that has been emblematic of what has worked during the great pandemic of 2020.
Peloton's stock has gone from $16 to $147 during a remarkable period where it has had to ramp up to demand and just can't because of delays in West Coast ports -- a common problem now -- and Covid-related production problems. We have been able to ignore them for a small company that's now doing $1 billion a quarter and producing bikes and now tread mills that are in extraordinary demand. We can't do it any more even if the key metric, connected fitness, is up 134% year over year to 1.67 million, an astonishing growth rate for a $46 billion company. We can't, not when it needs to spend $100 million extra to get the bikes to those who might want those lucrative subscription services.
Peloton repeatedly assured us there are no demand issues caused by the bottlenecks, but here's the rub: When we are finally jobbed to the max, will people continue to work out this way, something the company assures us is secular because the customer prefers it to other methods, presumably the community gym and the once-loved competitive spin class? Six percent of the float is sold short, too high in this market, too many doubters, but doubt we must, especially with the company bringing out new, riskier products and Apple (AAPL) offering features that might compete successfully.
Let's get some contrast for a second, though. Thursday night we had Linda Rendle on "Mad Money." She is the new CEO of Clorox (CLX) , which reported a staggering 10% increase in organic growth, and it, too, can't meet demand for its wipes until the end of 2021. Rendle is convinced that, like Peloton, the world has changed and even post pandemic cleanliness will be closer to godliness than a year ago.
The crowd reaction? Nobody liked either quarter. Peloton's extra bottleneck costs assuaged no one. Rendle's belief that we will embrace a higher growth rate for a company that didn't have one pre-pandemic seems true, but not enough to make a difference to those who have moved away from the once-hot stock.
I think these two stocks set up the post-pandemic world in a crystal-clear way. Peloton is a software as a service company that is expanding rapidly and is not able to make what people want but says it's not losing prospective faithful. We may use more Clorox post-pandemic, but not enough to move the needle, hence why the stock has been a suboptimal performer post the Pfizer (PFE) -Moderna (MRNA) breakthrough.
I think that Peloton is here to stay, but it is also something that is a wealthy person's workout. Clorox is simply a product to store in the pantry. You will store more of it, but not enough to move the needle.
So what do you have here? I think that, as is so often the case, I like to take the gun away from my head and say you know what, right now there is simply no way we can figure out what the consumer will do with Peloton because the consumer herself doesn't know. There is a joy to working out with others that I think is an old habit that's not dead. You are literally betting if you buy that the bikes will come, the treadmills will arrive and the Precor addition of higher-end machines will extend the family. That's too iffy for me. Clorox? I think it literally has to take out its gains because the gains, while not ephemeral, are not loaded with profitable services and software. They are incremental. No one pays up for incremental.
So you wait. And you say to yourself, those are compelling exercises in crowd battleground psychology and nothing more, and you feed your head with easier stories until the forecast becomes more clear.
