Apple Fitness+ Riding On Halo Effect Will Leave Peloton Trailing In Subscriptions, Munster Says

Loup Ventures analyst Gene Munster shared his take on the recently-launched Apple Inc’s AAPL Fitness+ service and how it compares with rival Peloton Interactive, Inc PTON on Wednesday.

What Happened: Munster estimates that Apple would be able to gain 15 million subscribers in the next three years for its newly launched fitness service. 

Munster noted that Peloton as a comparison has 1.85 million paying subscribers at the end of the last quarter, 510,000 of which are on the $12.99 per month plan that does not require a bike.

The analyst said the “510 number” could swell to a few million reaching up to 5 million potential subscribers over time. 

The remaining base that is made up of 1.3 million subscribers could grow to 4 or 5 million, as per Munster.

“I think collectively [Peloton] still will lag where Apple Fitness+ is at that 15 million,” said Munster.

Why It Matters: The “other story” according to Munster is the “time-tested halo effect” that Apple Fitness+ could have.

“They have the watch, the watch users want to get Apple Fitness+. People who want to try out Apple Fitness+ want to buy watches,” the analyst explained.

Munster theorized that If Apple manages to sell another 10 million watches at $300 a piece — that could add $3 billion.

“You could find a way to think about the halo effect plus the subscription effect to get to $4.5 billion per year.”

The halo effect that the new service will generate could “end up being a little more measurable” at 2-3% of total revenue and is “another example of low lying fruit for Apple,” as per the analyst. 

Munster said Peloton is not going to reach where Apple Fitness+, primarily because it is more of a “niche product.”

Peloton CEO John Foley does not think Apple’s entry into the fitness space constitutes a threat as they have not entered the hardware category.

Price Action: On the same day, Peloton shares closed nearly 4.9% higher at $134 on Wednesday and gained 0.11% in the after-hours session. On the same day, Apple shares closed mostly unchanged at $127.81. 

See Also: Why This Peloton Analyst Says An Apple Fitness Subscription Poses Little Threat