Time for someone else to ride a Peloton bike?


New York
CNN business

Peloton unveiled a new high-priced rowing machine on Tuesday. But the company still faces rough currents as it struggles to find its way into the friendlier waters of the stock market.

Shares of Peloton ( PTON ) are down a whopping 70% this year. Co-founders John Foley and Hisao Kushi announced last week that they would be leaving the company. That news comes seven months after Foley stepped down as CEO, and Peloton ( PTON ) brought in former Spotify ( SPOT ) and Netflix ( NFLX ) CFO Barry McCarthy to lead the company.

Peloton also announced job cuts around the time of McCarthy’s hiring and announced more layoffs in August. It is clear that the restructuring is still not working. And a new $3,195 rower might not solve the company’s problems.

Peloton is one of several pandemic-era winners who are now finding it difficult to sustain the boom. Zoom (ZM) is in a similar situation. People are no longer stuck at home.

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

But a marriage between Peloton and an athletic apparel company or tech company could make sense, especially since Lululemon ( LULU ) has entered the home fitness market with its $500 million acquisition of Mirror in 2020.

With that in mind, Nike ( NKE ) or Adidas ( ADDDF ) could be Peloton buyers. Both companies have also recently introduced Peloton branded clothing collections.

Apple ( AAPL ) and Google owner Alphabet ( GOOGL ) are already big players in the fitness tech market thanks to the Apple ( AAPL ) Watch and Google-owned Fitbit. Both companies are sitting on mountains of cash and could easily absorb Peloton. The company’s market value is now just $3.4 trillion, down from a peak of nearly $50 trillion in early 2021.

Amazon ( AMZN ) is also plausible as a potential Peloton owner. The retail giant announced last month that it planned to buy Roomba owner iRobot ( IRBT ) in a sign that the company is willing to bring in more gadget makers. Peloton recently announced that it would begin selling gear and apparel on Amazon ( AMZN ) .

Nike and Amazon were mentioned in several media outlets as potential acquirers for Peloton in February, before McCarthy was hired. However, Peloton may not be the most compelling acquisition target just yet, according to Evercore ISI analyst Shweta Khajuria.

Khajuria said McCarthy needs more time to cut costs and focus the business so Peloton starts receiving positive cash flow.

“Peloton would be a more attractive acquisition target after that. So nothing seems imminent in the current environment,” he said.

Analysts at Goldman Sachs also said in a report this week that “there is an increased focus among investors on the operating stories of 2023” and specifically mentioned Peloton as one of them.

McCarthy appeared at Goldman’s Communacopia technology and media conference this month, and Goldman analysts said he “continued to emphasize Peloton’s digital subscription strategy” and that “investor attention was focused on how to … maximize the connected market opportunity.” fitness, fitness at home and digital health”.

So it looks like Wall Street is willing to give McCarthy a little more time to prove that his strategy to revitalize Peloton, with a greater focus on subscription revenue, can work.