Peloton’s no-good-very-bad downfall from its pandemic peak — losing over $20 billion in value since November and becoming a dangerous subplot in prime time TV — has attracted speculation that the connected fitness company is a target to be acquired, but by whom? A Friday evening report from the Wall Street Journal tosses out Amazon as one of the “potential suitors” that may be considering a deal — just as markets closed for the weekend and only a few days before Peloton issues its Q2 2022 earnings report on February 8th. Just the suggestion caused a spike in Peloton’s stock price, sending it up 20–30 percent in after-hours trading.
Peloton started 2020 as the butt of jokes thanks to a terrible holiday commercial. Nobody was laughing a few short months later. When lockdowns began, Peloton started by offering a free 90-day trial to its app — no bike purchase necessary. By mid-2020, Peloton said it had 1.1 million subscribers and posted its first-ever profit. Amid heavy shipping delays, Peloton slashed the price of its original Bike and introduced two new products. By the end of the year, it spent $420 million to buy Precor, one of the world’s largest commercial fitness equipment makers. It kicked off 2021 by dropping another $100 million to fix shipping delays and yet another $400 million to build a factory in Ohio.
And then the problems started. Over the summer, Peloton recalled both its treadmills following reports of several injuries and, in one instance, a child’s death. With the COVID-19 vaccines, restrictions were relaxed, and people began returning in droves to brick-and-mortar gyms. Sales stalled, even as Peloton cut the price of its original bike down to $1,495. In a reversal of fortunes, Peloton reported a net loss of $376 million for Q1 2022, sending its stock into freefall the same day Planet Fitness reported it had exceeded expectations. Peloton CEO John Foley admitted in an investor call that the company had misjudged how things could change after people started getting back to normal life.
Peloton’s yo-yoing fortunes over the last two years have been well documented, but combine the deep-pocketed tech giants trying to enhance their health and fitness portfolios and the reality of re-opening gyms, there are some dots to connect. Over the last few weeks, some reports have suggested Apple as a possible landing spot, but that seems unlikely. Apple’s health approach uses the Watch first, then connects services to any fitness equipment its customers prefer to use, not high-priced workout-specific hardware that can be replaced by a cheaper bike and BYO tablet.
Amazon makes a little more sense as a destination, even if it’s only a little more. There was an almost-launch of a Peloton-like “Prime Bike” in 2020 that I still can’t figure out, plus two attempts at fitness-tracking wristwear of its own with the Halo Band in 2020 and Halo View in December. Shelling out double-digit billions — a purchase could cost something near the $13.7 billion Amazon spent to acquire Whole Foods — on Peloton would be an expensive but effective way to catch up with the fitness/health sector competition.
According to the WSJ, Amazon is working with advisors to consider its next move. Whether an acquisition attempt comes from the company or anyone else is still up in the air. Also muddying the situation, according to the paper, is that CEO John Foley and other insiders control 80 percent of Peloton’s voting shares, so activist investor calls for a sale may not carry much weight. Either way, we’ll probably have a better idea of the company’s future by the time its earnings report hits on Tuesday afternoon.