One of the biggest winners on Monday was Peloton (NYSE: PTON). Shares skyrocketed after anonymous sources reported the company might be getting bought out by a major tech giant. The news was well-received by the markets, as many activist investors have been urging Peloton to go private for a while now already. Now it seems that this might be happening after all.
Peloton has been struggling over the past year or so. Whatever pandemic gains the company saw have since been eradicated, and the famous fitness-equipment maker announced it would stop production of its signature bike products from February to March. Amidst all of this, many top shareholders have urged management to sell Peloton to a high-end tech company instead.
According to insiders at the company, reports have named multiple big companies as being potential acquirers. This includes Amazon, Nike, and even Apple might all be possible buyers for the company. However, the same insiders said that these were still very preliminary talks and that Peloton has yet to start a formal sales process yet.
“A company is worth what someone’s willing to pay for it. If a mega-cap decides to pay up for Peloton, that’s all that matters. However, until that happens, we question whether it’d make sense,” said BMO analyst Simeon Siegel. He added that he remains skeptical of how much value Peloton could bring to a big tech giant, especially “given it’s small size, faltering demand and declining engagement.”
Activist investors have urged Peloton to look into a sale for a while now. The most notable of which include Blackwells Capital, which owns less than 5% of the company’s total outstanding shares. Blackwells has even pushed to try and get Peloton’s CEO fired, mainly because he used to be ardently opposed to selling Peloton.
Shares of Peloton were up over 21% following the news. Compared to over a year ago, however, shares are still down a staggering 79.5%, dwindling Peloton’s market cap down to just $9.7 billion.
The majority of analysts remain pessimistic about the company’s chances, especially as it tries to transition into providing more alternative services like fitness program subscriptions. However, even this business shift is on shaky ground, as the company is preparing to hike the price of its service by 17% to $139 per year.
A few contrarian analysts are surprisingly optimistic about Peloton’s chances, however. This includes John Blackledge at Cowen & Co, who thinks the company could capture a significant portion of the growth seen in the global fitness industry. In a research note, Blackledge compared Peloton to Netflix back in 2012 during the early days of streaming service providers. Time will tell which direction Peloton will move towards.
Peloton Company Profile
Peloton Interactive Inc operates an interactive fitness platform. It operates its business in two reportable segments: Connected Fitness Products and Subscription. Connected Fitness Product revenue consists of sales of bike and tread and related accessories, associated fees for delivery and installation, and extended warranty agreements. Subscription revenue consists of revenue generated from monthly Connected Fitness Subscription and Digital Subscription. The company generates the majority of the revenue from the sale of Connected Fitness Products. – Warrior Trading News
