Shares of Peloton (PTON) have been rallying during the past two trading sessions following a report that noted that several firms could be in the running to acquire the trendy fitness equipment maker.
Currently, Amazon (AMZN) and Nike (NKE) are two companies that may be exploring options to place a bid. The firms involved refused to shed light on further details at this juncture. Still, such interest is encouraging for dip buyers. Perhaps Peloton stock should have never sunk as low as it did amid the rate-induced round of panic-selling.
PTON is oversold as it is still 78% off its highs and has perhaps overswung to the downside. With an intriguing brand with plenty of growth levers, I am bullish on PTON stock.
Whether or not a big deal happens, though, remains to be seen. The company could certainly use a change of scenery after eroding sales and margin pressure points. In any case, Peloton has fallen too hard, too fast, such that the valuation has likely attracted the interest of more than just a few firms.
Peloton Stock: Finally Ready to Pedal Forward after Brutal Crash
Catching a bottom in shares of Peloton has been a virtually impossible task thus far. Recent interest in acquiring the firm, I believe, has put in a bottom, even if all suitors end up walking away.
Big-ticket discretionary goods like stationary bikes are prone to big upswings and downswings in demand. When put on the receiving end, the pain for such highly-discretionary firms seems like it’ll last forever.
Shares of Peloton went from a white-hot momentum stock that was making everybody rich to a dangerous falling knife that hurt almost everybody who had the courage to step in and attempt to catch it on the way down. The equipment maker faced sky-high year-over-year comparables that were virtually impossible to top.
Now that the worst is in the rear-view mirror, Peloton looks ready to move on in spite of its challenges. Did the company deserve to pedal backward after an epic rise in 2020? Definitely. However, did it deserve to lose all of its pandemic gains? Probably not.
The Peloton brand is still robust, and although demand for its bikes and treadmills isn’t in an ideal spot, many satisfied customers are still using the firm’s subscription services.
Despite the stickiness of the Peloton subscription, though, it’s going to be tough to convince those who bought a bike in 2020 to buy a new one or a Peloton Tread in 2022. Still, in time, I do think Peloton has the means to upsell its existing customer base, whether it be through parallel fitness equipment or clothing dawning Peloton’s unmistakable logo.
Indeed, the latter product category may be why Nike has been reported to show interest in the firm. Nike is an apparel king, and Peloton looks like a natural addition to its durable fitness empire.
At the same time, e-commerce kingpin Amazon could leverage its logistics capabilities to trim away at costs. Undoubtedly, Peloton has been discounting its flagship bike. Under the Amazon umbrella, the bike could be marked down even further, as Amazon is famous for passing value to its consumers.
Who’s Likeliest to Scoop Up Peloton?
Personally, I think Amazon and Apple (AAPL) have the most to gain from a scoop up of Peloton. Apple’s Watch and Fitness+ service has been a hit. Merging the Peloton and Apple Fitness+ services could produce an unstoppable force. Better integration with Apple Watch, AirPods, and an iOS-like interface on Peloton screens could be a game-changer that could reaccelerate sales.
While Apple should make a move, I don’t think it will come due to a brand clash. Apple is more than capable of producing its own offering, slapping an Apple logo on it and taking share.
Between Apple and Amazon, I think Amazon and Peloton is the match made in heaven.
Amazon could use a cherished brand like Peloton in its line-up. Further, it can better leverage its logistical muscle while gaining immediate entry into the fitness service business.
Undoubtedly, the inclusion of a Peloton subscription in a Prime membership could produce an incredible value proposition, making Prime all the much stickier, even with its recent price increase. In Amazon’s hands, I think Peloton in the $10-12 billion range could be a steal.
Wall Street’s Take
Turning to Wall Street, PTON stock comes in as a Moderate Buy. Out of 20 analyst ratings, there are 10 Buys, eight Holds, and two Sell recommendations.
The average Peloton price target is $42.17, implying an upside of 10.9%. Analyst price targets range from a low of $30.00 per share to a high of $68.00 per share.
The Bottom Line on Peloton Stock
There’s a lot of interest in PTON stock now. While many firms could produce meaningful synergies from a deal, I think the company is most valuable in the hands of Amazon.
In the meantime, this momentum can continue with PTON stock as takeover speculation picks up.
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