Why Peloton’s TikTok Rally Doesn’t Fit

Wall Street traders need to exercise their brains a bit more. Peloton shares jumped 14% on Thursday after the struggling fitness firm struck a deal to put its workout videos on TikTok. Sure, associating with TikTok can help almost anything and anyone seem cool with the kids. But investors seem to be misreading this situation. The “exclusive partnership,” as Peloton called it, is essentially a giant ad on TikTok for the fitness firm. It’s designed to get people to download the Peloton app, where they’ll hopefully go on to sign up for a paying subscription.

But even if they do download the app, there’s no guarantee they’ll subscribe. And as there are already lots of workout videos on TikTok, not to mention other similar apps such as YouTube, it’s hard to see why this new fitness hub featuring Peloton content will move the needle for the fitness company. Sure, it makes sense for Peloton to advertise its app on TikTok, given its enormous reach. As Oli Snoddy, Peloton’s vice president of consumer marketing, told CNBC, TikTok “increasingly reaches everyone, including the younger audience.” But that is hardly worth the $270 million in additional market capitalization that resulted from the stock jump. You could make the opposite case: that the chances this ad doesn’t generate enough paying subscribers to cover its cost should mean investors sell their Peloton shares.