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Peloton stock rises on report Amazon among potential buyers


Brody Longo trains on his Peloton exercise bike on April 16, 2021 in Brick, New Jersey.

Michael Loccisano | beautiful pictures

Peloton Having been battered and beaten up a lot in recent months, the connected fitness company is now attracting interest from outsiders.

Shares of Peloton jumped more than 30% in extended trading Friday after The Wall Street Journal giant e-commerce report Amazon approached the company about a potential deal. The magazine says other potential suitors are swirling around, but no deal is imminent and there may not be one at all.

Peloton has yet to make a formal sale, but there is genuine interest in the company, a person familiar with the negotiations told CNBC.

A representative from Peloton did not immediately respond to CNBC’s request for comment. Amazon declined to comment.

Potential interest from outsiders comes as Peloton’s stock has tumbled in recent months and activist group Blackwells Capital, which has less than a 5% stake, urged the company public to review a sale. In a letter to Peloton’s board, which also called for CEO John Foley’s firing, the Blackwells speculated that potential buyers could include Apple or Nike.

Peloton’s roughly $8 billion market cap has fallen from a high of nearly $50 billion about a year ago. Investors poured into stocks after the Covid pandemic broke out, sending the stock up more than 440% in 2020. But they started to flee as many realized that future growth would come at a higher cost. a lot of. Shares closed Friday at $24.60, well below its IPO price of $29.

Peloton could be an attractive target, if sold off, for any company looking to strengthen its relationship with the health and wellness industry. Amazon has been investing in connected health for years, including launching the Halo Health and Wellness tracker. And last year, Amazon added interactive home workout videos and guided meal planning to its Halo subscription.

It’s not immediately clear what Amazon will do with Peloton’s hardware and technology, but it’s possible that Amazon could integrate Peloton’s services into its growing device unit, which houses the Fire streaming stick Popular TVs, voice-activated Echo smart speakers, and a bunch of connected homes Cosmetics.

Peloton’s original bike, priced at $1,745 including shipping, will become the most expensive piece of hardware Amazon sells, aside from the $999 Astro home robot. Peloton’s Bike+ is even more expensive, at $2,495. Its Tread retails for $2,845.

According to the Journal, Amazon’s existing businesses, such as its logistics arm, could also help Peloton with ongoing supply chain issues. A monthly Peloton subscription, which costs $39 for those who own one of its connected devices, could theoretically also be included in Amazon’s Prime membership, it said.

A man walks in front of a Peloton store in Manhattan on May 5, 2021 in New York.

John Smith | Corbis News | beautiful pictures

Peloton is expected to report second-quarter financial results on Tuesday, after the market closes and all eyes will be on its full-year outlook. Peloton last week pre-announced a number of second-quarter indexesincluding revenue, expected to fall within its expected range, and connected subscribers, fell short of its own estimates.

Back in November, Peloton slashed its fiscal 2022 forecast as it reports slowing revenue and weakening subscriber growth. Foley warned at the time that Peloton was becoming more difficult to forecast growth, as it had already made big profits from the pandemic.

Through 2020 and into 2021, Peloton has invested heavily to increase its supply. It has hired thousands of additional employees to help meet customer service and home delivery requests. But that left the company with a cumbersome cost structure.

CNBC reported last month that Peloton is working with consulting firm McKinsey to look for areas to cut costs, which will likely lead to staff layoffs. Peloton is also planning its right production size.

Foley said in a statement in late January that Peloton is “taking significant regulatory actions to improve our profit outlook and optimize our costs.”

In a separate memo for employeesshared publicly, the CEO wrote: “We find ourselves in the middle of a once-in-a-century with the COVID-19 pandemic, and what we predicted over the course of three years has happened. in months in 2020 and through 2021.”

Some analysts argue that the sell-off in Peloton stock has led the market to undervalue the company’s existing connected fitness subscription base. Peloton counted about 2.5 million at the end of the first quarter. Its entire member base, including digital-only subscribers, totaled 6.2 million. This can be a valuable asset to any potential suitor.

In a note to clients on Jan. 20, Loop Capital Markets said that Peloton’s subscription business alone could be worth “significantly higher” than the company’s current market value. .

Analyst Daniel Adam says that assuming the most recent figure is 2.5 million connected fitness subscriptions, the business could be worth as much as $80 per share. This valuation makes Peloton easier to compare with, he added Netflix.

Amazon has made a number of large, notable acquisitions in recent years. Amazon bought high-end grocery store Whole Foods for $13.7 billion in 2017, its biggest deal to date. Last May, they signed an agreement to buy MGM Studios for $8.45 billion.



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