Does A Potential Peloton Acquisition Make Strategic Sense For Apple?

Rumors of a potential sale of Peloton Interactive, Inc. PTON have been flying thick and fast following reports of fundamental issues at the at-home fitness brand.

While Amazon, Inc. AMZN and Nike, Inc. NKE are being talked of as potential suitors, an analyst at Wedbush said Apple, Inc. APPL could also join the race for Peloton.

The Apple Analyst: Daniel Ives has an Outperform rating and $200 price target for Apple shares.

The Apple Takeaways: Peloton stock is down over 80% from pandemic highs amid growth concerns, the gradual winding down of work-from-home and some execution issues, analyst Ives said in a note.

A handful of technology and consumer brand stalwarts could be keen on bidding for the company, and activist investors are also pushing for a sale, the analyst noted.

"We would be shocked if Apple is not aggressively involved in this potential deal process," Ives said.

The analyst sees a potential Peloton acquisition as a major strategic coup for Apple, catalyzing its aggressive health and fitness initiatives over the coming years.

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"With ~2.8 million paid subscriptions today and a very strong/unique competitive moat, Apple acquiring Peloton would be both an offensive and defensive acquisition in our opinion," the analyst said.

Cross-selling other consumer services into the Peloton ecosystem would make a ton of strategic sense for the likes of Walt Disney Company DIS, Nike, Amazon or Apple, Ives said. The prospects of another stalwart getting their hands on Peloton, the analyst said, would be a business model risk for Apple's health care segment and future endeavors.

"On the offensive front, Apple through its Fitness + subscription service and Apple Watch strategy would be able to leverage the Peloton services and flywheel to significantly bulk up its health care initiatives, which have been a key strategic linchpin for Cook," Ives said.

Peloton would likely be an acquisition in the $12 billion to $15 billion range depending on the timing and competitive process, the analyst estimates.

AAPL Price Action: At last check, Apple shares were trading near-flat at $172.50. 

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