Apple Floated as Potential Buyer of Peloton
Following months of bleak information about Peloton’s “precarious state,” together with the revelation that it has halted manufacturing of its bikes and treadmills, Apple is being floated as a possible purchaser of Peloton’s troubled health enterprise.
Yesterday, CNBC reported that Peloton will quickly cease manufacturing of its related health merchandise as a result of a “significant reduction” in client demand, a urgent want to manage prices, and amplified competitor exercise. In a confidential firm presentation earlier this month, Peloton informed staff that merchandise such as the Bike, Bike+, and Tread will likely be out of manufacturing for between six weeks and 6 months.
As a enterprise, Peloton has excessive buyer acquisition prices, translating to excessive product pricing. Toward the top of final 12 months, the corporate diminished the value of its entry-level bike by nearly 20 p.c to $1,495 in an try and drive up gross sales by means of the top of 2021. It then emerged that the corporate is planning to lay off 41 p.c of its gross sales and advertising and marketing employees.
CNBC additionally revealed that the corporate’s fiscal forecasts don’t take note of new supply and setup charges between $250 and $350 that clients must pay on prime of the price of the Bike or Tread. In addition, Peloton has seen low electronic mail seize charges for its upcoming $495 power coaching product, “Peloton Guide.”
In a press release preannouncing its upcoming monetary outcomes yesterday, Peloton CEO John Foley stated that the corporate is now “taking significant corrective actions to improve our profitability outlook and optimize our costs.” Peloton’s inventory has since plunged 24 p.c, now floating round 85 p.c under the place it was buying and selling this time final 12 months, and even $5 lower than when it went public in 2019. There are additionally indications that Peloton is shedding market share within the related health trade.
The Information reports that Peloton’s manufacturing halt and the precarious state of its enterprise appears like a prelude to an acquisition by a much bigger firm, positing that Apple is the perfect candidate to purchase Peloton:
If Peloton is to have a future, it will be higher off as half of a much bigger, extra diversified firm. Apple is a perfect candidate to tackle that challenge. It has the Fitness+ subscription service for courses and it markets the Apple Watch as a tool that may assist with jogging and different train actions. It may shut Peloton’s shops and promote the tools by means of its personal shops. And hey, after right this moment, Peloton’s market capitalization is all the way down to $7.9 billion. Cook may pay for that by dipping into the change jar in his kitchen.
Analyst Neil Cybart recently highlighted how Peloton is now actively threatened by Apple Fitness+, which is significantly cheaper, costing as much as $388.01 much less yearly for digital courses alone. Cybart cautioned that with out main adjustments 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.”