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(Bloomberg Opinion) -- It seems logical that six months of pandemic-era living would be a boon for Peloton Interactive Inc. Gyms were closed for long stretches, and even as some have reopened, crowded fitness classes don’t feel safe or are no longer offered. These dynamics have led more people to embrace digitally connected at-home exercise – an emerging business of which Peloton is a standout. That, in turn, has helped send Peloton shares soaring.The hard part now is making sure this moment isn’t as good as it gets. However strong Peloton’s business has been in recent months, it faces big challenges in the year ahead. These include branching more successfully into new product lines while also fending off fresh competition. On Tuesday, investors thought one such rival had landed when Echelon Fitness announced that it had collaborated with Amazon.com Inc. on a $499 Prime Bike. In a weird twist, Amazon later said the bike was not an Amazon product and that it was asking Echelon to stop selling it. But the dip in share price that Peloton saw after Echelon’s initial announcement underscores the fragility of its position. At the outset of the crisis with lockdowns in place, Peloton orders spiked, driving revenue growth of 172% in its June quarter from a year earlier. Demand was so hot, the company temporarily paused marketing as it worked to meet orders. As ad spending ramps back up, the window of opportunity remains open to reach customers who would not have considered buying a Peloton in February but who now want at-home alternatives to the gym. Peloton has already been shrewd at adapting to the moment, offering a 90-day free trial of its app in the early days of the pandemic that included access to such classes such as interval training or yoga that can be done without its signature bikes or treadmills. Sign-ups surged, and the company now has 500,000 digital subscribers, up from 176,600 at the end of March. The app isn’t a moneymaker, but its growth is important because the company believes it is among its most effective gateways for people to buy the equipment and pricier subscriptions that are the core of the business. The pandemic appears to have helped Peloton evolve its business in a key way: an explosion in the number of workouts per subscription. It seems being stuck at home has been an impetus for Peloton owners to either use its offerings more often or, crucially, tap into the company's wider range of classes, such as stretching and meditation. In other words, it is serving for many as a bona fide replacement for a gym membership — just as Peloton has long intended. That should help with customer retention and make its steep price tags look like a good value instead.Despite those favorable shifts, caution is warranted. Peloton is only in the earliest stages of becoming a not-just-a-bike company. It first offered a treadmill in 2018, but that item hasn’t quite taken off like its flagship stationary bicycle — in part because it cost around $4,000. Peloton recently began offering a new treadmill that costs about half the price of the original one — still not cheap, but the same as one of its stationary bikes. So now comes a huge test: Can Peloton score big in a new product category, proving it is not destined to be a fitness fad, a super-expensive version of P90X or Tae Bo? Working in Peloton’s favor is the fact that treadmills are generally more popular than bikes; the company says that about 5 million treadmills are sold in the U.S. each year, compared with 1.6 million stationary bikes. Treadmills are the most-used equipment at fitness clubs, according to the International Health, Racquet & Sportsclub Association. But shoppers have many cheaper options to choose from, based on what I found from a quick scan of the treadmills available on the Dick’s Sporting Goods Inc. website. Peloton, then, must convince consumers of the merits of having a machine that offers its trademark on-demand and live programming. If it doesn’t succeed, it will raise serious questions about the company’s ability to evolve beyond its bike business. The lower-priced Prime Bike may have turned out to be a fantasy, but the competition for Peloton is undoubtedly heating up. Earlier this year, Lululemon Athletica Inc. acquired home fitness startup Mirror, vowing to give the newcomer visibility in its brick-and-mortar apparel stores. SoulCycle now offers an at-home bike, which could have appeal in cities where it has high brand awareness thanks to its fitness studios. Apple Inc. this month announced Fitness+, a home fitness option that integrates with Apple Watch. Any one of those, or all of them together, could thwart Peloton’s progress. Peloton, which has about 1 million connected fitness subscribers, has audacious growth goals, but I am skeptical. The company has several layers of criteria to calculate what it calls its serviceable addressable market — or the sales potential for its current lineup at current prices — beginning with people ages 18 to 70 with household incomes of at least $50,000. While Peloton has made inroads with less affluent customers, shoppers at the low end of that income group seem like a tough get for products that cost $1,895 and up.Dig into its market assumptions more deeply, and there are more reasons for caution. In a recent research note, BMO Capital Markets analyst Simeon Siegel compared Peloton’s figures from last year with ones it released this month. In its 2019 IPO offering document, Peloton estimated 52 million people were interested in learning about Peloton products before hearing their price. In a September investor presentation, the estimate of that same potential market was unchanged at 52 million. If the pandemic has dramatically upended Peloton’s prospects, Siegel notes, shouldn’t that figure have grown? Peloton pegged its serviceable addressable market at 14 million units in its 2019 estimates. As of this month, that estimate had risen to 20 million, in part reflecting the theory that there will be a significant increase in families that have more than one Peloton product in their households. Perhaps. And yet, despite the many meme-able images of Peloton users cycling in their cavernous, lavishly appointed, mid-century modern abodes, I have to wonder how many people have space (let alone the budget) for an expanded suite of Peloton hardware. Peloton is emblematic of a broader Netflix-ification of how people spend their time, an embrace of on-demand and at-home consumption of everything from movies to restaurant meals. But it is also selling pricey, discretionary products in a gloomy economy to customers who have a growing array of choices. Investors would do well to keep that in mind before they bet on a repeat of this year’s breakout success.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.