- Mirror has the potential to become the next Peloton, pulling in $700 million in revenue by 2023, according to a Bank of America note.
- The home fitness startup is being acquired by Lululemon for $500 million.
- Analysts say it well-positioned to benefit from continued growth in the home fitness market and from having access to Lululemon’s wider customer base.
- Visit Business Insider’s homepage for more stories.
Lululemon has just acquired the new Peloton, analysts say.
In a note to clients on Wednesday, assessing the news of Lululemon’s recent $500 million acquisition of Mirror (the home-fitness startup behind the $1,500 mirror that enables customers to stream workout classes from their home), a group of Bank of America analysts outlined Mirror’s potential for growth and compared it to its widely successful competitor, Peloton.
These analysts estimated that Mirror is where Peloton was in 2016 in terms of subscriber numbers with around 60,000 to 70,000 customers on its books. It expects Mirror to grow rapidly in the next few years and reach up to 600,000 subscribers by 2023, pulling in more than $700 million in revenue. For comparison, Peloton ended fiscal 2019 with 511,000 subscribers and annual revenue of $915 million.
These analysts offered two key reasons for this level of growth. Firstly, Mirror will continue to capitalize on a boom in the at-home fitness market, which has grown rapidly during the lockdown as more consumers invest in home workout options while stuck at home. Analysts say, at this point, we are only scratching the surface in the home fitness market and that it continues to grow at a rapid rate taking market share from gyms and boutique fitness studios in the future.
“We especially expect disruption in the premium end of the market where at-home options are cheaper for consumers over time compared to attending classes,” these analysts wrote.
Secondly, they said that Mirror has the potential to flourish under Lululemon’s control by having access to its wider customer base and being sold in its stores and online channel.
“Mirror’s target customer is very similar to Lululemon’s higher income, active lifestyle customer base, which will lower its customer acquisition costs,” the analysts wrote. “Lululemon can also increase the distribution for Mirror by selling it on their website and in-stores.”
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It isn’t only Mirror that stands to benefit, there are advantages on both sides. In the short term, it provides Lululemon with a new revenue stream and access to this booming home fitness market, and in the long term, it gives the company the opportunity to sell its apparel through another platform.
“I think it is an incredibly interesting, insightful, and relevant move for both parties,” Greg Kahn, the CEO of GK Digital Ventures, which advises companies on technology and digital transformation, said Tuesday on a call with Business Insider.
“It really puts Lululemon in a new light,” he said. “It is almost future-proofing the company and saying: ‘We are moving beyond our traditional commerce structure.'”
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