Apple (AAPL) has been mentioned as one of the companies that may be interested in acquiring Peloton (PTON). But Bloomberg’s Mark Gurman, writing on the Power On newsletter, argues that there is no compelling reason for Apple to pursue such a deal. AAP stock price jumped 6.98% on Friday to close at $170.33. Peloton stock rose 6.97% to close at $25.64.
Peloton makes fitness equipment such as exercise bikes and treadmills. It also offers fitness content that customers can access on the equipment or through the phone. But the business is now struggling that CNBC recently reported that Peloton plans to stop production of its fitness equipment for up to six months because of weak demand.
Peloton investor Blackwells Capital thinks Peloton CEO John Foley is not running the company well and wants him replaced. Furthermore, the investor now wants the Peloton to consider selling itself. In addition to Apple, Blackwells mentions that Nike (NKE) and Walt Disney (DIS) may also be interested in buying Peloton.
Peloton May Be Too Expensive for Apple
Considering Apple’s fitness ambitions, Peloton may be a compatible business. But Gurman thinks Apple can build a successful fitness business on its own without needing Peloton’s help. Gurman explains that the type of fitness equipment that Peloton makes carry low profit margins and their upgrade cycles don’t align with Apple’s hardware products like the iPhone.
Peloton may have great fitness content, but Apple’s own Fitness+ service is also growing and Apple can continue to invest in building its content portfolio without needing Peloton, Gurman argues.
While acquisitions have been part of Apple’s growth strategy, the iPhone maker has traditionally preferred modest deals. For example, its most expensive deal ever is Beats, which it bought for $3 billion in 2014. In contrast, Peloton is valued at more than $8 billion, Gurman explains.
Analysts’ Rating
On Friday, Oppenheimer analyst Martin Yang reiterated a Buy rating on Apple stock and raised the price target to $190 from $170. Yang’s new price target suggests 11.55% upside potential. The analyst observed that Apple reported strong December quarter (Fiscal Q1 2022) results and issued upbeat outlook for Q2. Further, Yang noted that Apple has continued to gain new customers at an impressive pace, explaining that six out of 10 customers who bought a MacBook in China were new to the device.
