Amazon named as possible Peloton buyer in a well-timed rumor

Peloton’s downfall since its pandemic peak has been a mixed bag. lost over $20 billion and became a serious subplot on prime-time TV. There is speculation that the connected fitness company may be a target for acquisition. The Wall Street Journal published a Friday evening report that identified Amazon as one potential suitor. This report was just a few days before Peloton’s Q2 2022 earnings report. The suggestion alone caused a surge in Peloton stock price which soared 20-30% in after-hours trading.

Peloton began 2020 as the best joke thanks to a horrible holiday commercial. A few months later, nobody was laughing. Peloton offered a free trial of its app for 90 days before lockdowns started. No bike purchase was necessary. The firm reported that it had 1.1million subscribers by mid-2020 and had posted its first ever profit. Peloton cut the price of its first Bike and introduced two new products amid shipping delays. It spent $420,000,000 to purchase Precor, the largest commercial fitness equipment maker in the world, by the end of 2018. It also dropped another $100,000,000 to address shipping delays, and yet another $400,000,000 to build a factory for Ohio.

Then the problems began. Peloton recalls both its treadmills after several injuries and one child’s death. The COVID-19 vaccines were released and restrictions were removed. People began going back to their brick-and-mortar gyms. Peloton reduced the cost of its original bike to $1,495. However, sales stagnated. Peloton posted a net loss in Q1 2022 of $376,000,000, sending its stock into freefall on the same day Planet Fitness announced it had exceeded its expectations. In an investor conference, John Foley, Peloton’s CEO, admitted that the company was not able to see how things would change once people return to their normal lives.

Peloton’s zigzagging fortunes in the last two years are well documented. But when you combine the deep-pocketed tech titans looking to improve their fitness and health portfolios with the reality of reopening gyms, you can see that there are some connections to be made. Some reports suggested Apple as a potential landing spot over the past few weeks. However, this seems unlikely. Apple’s health approach relies on the Watch to connect to any fitness equipment. It does not force clients to use expensive hardware that can be substituted by cheaper bikes and BYO tablets.

Amazon is a more appealing destination than you might think, even though it costs a lot less. A launch of a Peloton-like “Prime Bike”, in 2020, was almost completed. There were also two attempts to make fitness-tracking wristwear with the HALO Band in 2020, and HALO View in December. Peloton is a cost-effective way to catch up to the fitness/health industry competition. A purchase would run to the $13.7 billion Amazon spent to buy Whole Foods.

According to the WSJ report, Amazon is consulting advisors to determine its next move. It is unclear if an acquisition attempt will be made by the company or someone else. According to the paper, CEO John Foley and other insiders hold 80 percent of Peloton’s voting shares. Activist investor calls for a sale might not be as strong. We’ll likely have a better understanding of the company’s future when its earnings report hits Tuesday afternoon.

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