Apple Floated as Potential Buyer of Peloton

Following months of bleak news about Peloton's "precarious state," including the revelation that it has halted production of its bikes and treadmills, Apple is being floated as a potential buyer of Peloton's troubled fitness business.

peloton tv workout cardio
Yesterday, CNBC reported that Peloton will temporarily stop production of its connected fitness products due to a "significant reduction" in consumer demand, a pressing need to control costs, and amplified competitor activity. In a confidential company presentation earlier this month, Peloton told employees that products such as the Bike, Bike+, and Tread will be out of production for between six weeks and six months.

As a business, Peloton has high customer acquisition costs, translating to high product pricing. Toward the end of last year, the company reduced the price of its entry-level bike by almost 20 percent to $1,495 in an attempt to drive up sales through the end of 2021. It then emerged that the company is planning to lay off 41 percent of its sales and marketing staff.

CNBC also revealed that the company's fiscal forecasts do not take into account new delivery and setup fees between $250 and $350 that customers will have to pay on top of the cost of the Bike or Tread. In addition, Peloton has seen low email capture rates for its upcoming $495 strength training product, "Peloton Guide."

In a press release preannouncing its upcoming financial results yesterday, Peloton CEO John Foley said that the company is now "taking significant corrective actions to improve our profitability outlook and optimize our costs." Peloton's stock has since plunged 24 percent, now floating around 85 percent below where it was trading this time last year, and even $5 less than when it went public in 2019. There are also indications that Peloton is losing market share in the connected fitness industry.

The Information reports that Peloton's production halt and the precarious state of its business looks like a prelude to an acquisition by a bigger company, positing that Apple is the ideal candidate to buy Peloton:

If Peloton is to have a future, it would be better off as part of a bigger, more diversified company. Apple is an ideal candidate to take on that project. It has the Fitness+ subscription service for classes and it markets the Apple Watch as a device that can help with jogging and other exercise activities. It could close Peloton's stores and sell the equipment through its own stores. And hey, after today, Peloton's market capitalization is down to $7.9 billion. Cook could pay for that by dipping into the change jar in his kitchen.

The idea of Apple acquiring Peloton is gathering steam among market observers, with the possibility being weighed up by The Motley Fool and Inc., among others.

Analyst Neil Cybart recently highlighted how Peloton is now actively threatened by Apple Fitness+, which is considerably cheaper, costing up to $388.01 less annually for digital classes alone. Cybart cautioned that without major changes in 2022, "Peloton is on track to be a Fitbit 2.0 - a company unable to compete with the giants subsidizing health and fitness tracking as an ecosystem feature."

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Top Rated Comments

Mansu944 Avatar
32 months ago
Probably someone with peloton stock trying to raise the price so they can sell.
Score: 68 Votes (Like | Disagree)
User 6502 Avatar
32 months ago
I’m surprised Peloton didn’t fail sooner. Expensive bikes, expensive subscription. You get the same thing with a phone/tablet and any cheap bike/treadmill paired with a subscription to some fitness program, many of which are cheaper than peloton or even free.
Score: 47 Votes (Like | Disagree)
JJayguy23 Avatar
32 months ago

Peloton does not deserve to get bought out, just needs to go under. Ridiculous business model.
Instead of Peloton, I ride my bicycle outside in the fresh air. Much cheaper, and I get good-ole vitamin D!!!!!
Score: 41 Votes (Like | Disagree)
Psychicbob Avatar
32 months ago
Are Apple considering investing in Coal as well?
Score: 39 Votes (Like | Disagree)
Sciomar Avatar
32 months ago
Peloton does not deserve to get bought out, just needs to go under. Ridiculous business model.
Score: 34 Votes (Like | Disagree)
urnotl33t Avatar
32 months ago
Why buy? Kill them then take their people. Why buy debt? That's stupid. This is business, not Sesame Street.
Score: 32 Votes (Like | Disagree)