With Peloton experiencing a myriad of issues and its stock down over 80% from its all-time highs, we delve into two potential acquirers.
Feb. 18, 2022
As the pandemic took hold, Peloton’s (NASDAQ: PTON) stock boomed as it saw rising demand with people opting for at-home workouts rather than going to the gym. Bike sales, subscribers, and members grew at unprecedented rates, with John Foley at the helm. Since then, the company has experienced supply chain issues, declining demand, and John Foley transitioning to Executive Officer. Despite these issues, it has a strong brand, and with a market cap of roughly $10 billion, it could be an attractive acquisition target, and we look at two of its potential suitors.
Nike (NYSE: NKE) is a multinational corporation that designs and manufactures footwear, apparel, sporting goods, and more. The Financial Times recently reported that Nike might be interested in acquiring Peloton, which would fit its brand and digital strategy and allow it to collect data.
The Nike brand is one of the most well-known brands globally, particularly in the fitness space. It has been expanding in the fitness space with the ‘Nike Training Club’ and ‘Nike Run App’. In addition to its hardware, Peloton’s subscription business provides a recurring revenue stream, and its classes could be a great addition to Nike’s connected fitness business.
Nike and Peloton have also previously collaborated on fitness apparel in 2020. This is a further opportunity that could be exploited if the deal happened.
The company has $15.1 billion in cash and cash equivalents and long-term investments in Q2 of fiscal 2022, partially offset by share repurchases and dividends. Nike has the financial means to pull off such a deal, but it would be a significant acquisition and larger than any other in its history.
Apple (NASDAQ: AAPL) needs little introduction as the largest company in the world with a market cap of roughly $2.77 trillion. It has a range of products such as the iPhone, Apple Watch and more, along with services.
Both Apple and Peloton are similar in selling premium hardware and are striving to increase their services revenue. Apple has been making strides into the fitness market with its hardware, such as the Apple Watch being linked to services like Apple Fitness+, which provides fitness classes. This app is another part of its ever-growing ecosystem and pushes into services, and the acquisition of Peloton would complement this.
Apple has also been making inroads into healthcare, with CEO Tim Cook viewing this as a huge opportunity. The acquisition of Peloton could also make sense from this standpoint with the Apple Health app, which provides health information “at your fingertips”, already being able to be linked with Peloton.
It also has no shortage of cash and cash equivalents which totaled $37.1 billion as of December 2021. This large cash pile would enable it to complete an all-cash transaction without putting a massive dent in the balance sheet. However, Apple’s largest acquisition to date is Beats which it bought for $3 billion, and management may view the risk of buying Peloton’s faltering business as too great.