Is it time for someone else to ride the Peloton bike?

Stock peloton (PTON) have fallen by a staggering 70% this year. Co-founders John Foley and Hisao Kushi announced last week that they were leaving the company. The news comes just seven months after Foley stepped down as CEO and Peloton brought in the former Spotify (PLACE) as well as Netflix (NFLKS) CFO Barry McCarthy took over the company.
Peloton also announced job cuts during McCarthy’s hiring and reported more layoffs in August. It is clear that the restructuring does not work yet. And a new $3,195 rower might not solve the company’s problems.

So maybe it’s time for Peloton to sell to a bigger company in the sports/athletics sector? Peloton was not immediately available to comment on a possible takeover.

Possible suitors

But a marriage between Peloton and a sportswear or tech firm might make sense, especially since Lululemon (LULU) has already entered the home fitness market with the acquisition of Mirror in 2020 for $500 million.
With this in mind Nike (NKE) or Adidas (ADDDF) may become potential buyers of Peloton. Both companies have also recently released Peloton-branded clothing collections.
Apple (AAPL) and Google owner Alphabet (google) are already big players in the fitness technology market thanks to the Apple Watch and Google-owned Fitbit. Both companies are sitting on a lot of money and could easily take over Peloton. The company’s market value is now just $3.4 billion, compared to a peak value of nearly $50 billion at the start of 2021.
Amazon (AMZN) also attractive as a potential owner of Peloton. The retail giant announced last month that it plans to buy the owner of Roomba. I am robot (IRBT), proof that the company wants to attract more gadget makers. Peloton also recently announced that it will start selling equipment and clothing on Amazon.
Nike and Amazon were mentioned in various media reports as potential buyers for Peloton in February, shortly before McCarthy was hired. However, according to Evercore ISI analyst Sveta Khadzhuriya, Peloton may not yet be the most attractive takeover target.

Turnover before takeover?

Khajuria said McCarthy needed more time to cut costs and get the business back on track so Peloton could start showing positive cash flow.

“After that, Peloton will become a more attractive acquisition target. So nothing is foreseen in the current conditions,” she said.

Peloton to stop making its own bikes

Analysts at Goldman Sachs also said in a report this week that “investors are paying increased attention to possible operational changes in 2023” and specifically named Peloton as one of them.

McCarthy appeared at Goldman’s Communacopia tech and media conference this month, and Goldman analysts said he “continued to highlight Peloton’s digital subscription strategy” and that “investors have been paying a lot of attention to how…to make the best use of market opportunities” . for connected fitness, home fitness and digital health.”

So it looks like Wall Street seems poised to give McCarthy a little more time to prove that his Peloton revitalization strategy with an increased focus on subscription revenue can work.

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