Saturday, February 24

Peloton gets “girlfriends” in his low hours: Amazon and Nike unleash rumors about their interest in the firm

During the beginning of the pandemic, when those who wanted to continue doing sports had no choice but to set up their own “gyms” at home, the demand for exercise bikes, elliptical trainers and treadmills it shot itself and companies like the American Peloton, which sells devices to participate in online fitness classes, stumbled upon a golden opportunity. In a matter of months, the firm saw how its value on the stock market skyrocketed and demand grew so much and at such a good pace that it had to reinforce its workforce. Now, with the gyms already open, the trend seems to be the opposite and rumors have begun to emerge about companies interested in bidding for the business. Among them, the one that stands out the most, announced by Wall Street Journal, it Amazon.

On Friday the economic newspaper reported that Peloton has attracted the interest of several “suitors”. Although he speaks of applicants, in the plural, he specifically highlights Amazon, a firm that —always according to Wall Street Journal— would have been discussing a possible agreement with advisers. As of today, however, there are no guarantees that the online shopping giant will make an offer or that Peloton itself will be receptive. In any case, the Seattle company would not be the only one that has put Peloton on its radar. Yesterday Financial Times went a little further and revealed that Nike would also be evaluating —although it spoke of preliminary steps— an offer for the fitness company. The Information points to another possible suitor: Apple.

The most curious thing is that the rumors seem not to have sat down with Peloton at all. After the information about the supposed interest of Amazon, its actions rose more than 30% in extended trading on Friday. And this despite the fact that there is no evidence that the company has initiated a formal sale process and that the Wall Street Journal recognizes that in the end everything could remain in borage waters and the agreement, if it came together, would not be imminent

From the stratospheric rise to the crash

The rumors about the future of Peloton come in a complex context for the firm. At the beginning of the health crisis, when home fitness seemed like a lucrative business, investors jumped on Peloton’s offering. His actions reached upload more than 440% in 2020 and the market capitalization bordered on 50,000 million dollars. To meet the high demand, the company invested in improving its supply capacity and strengthened its workforce. Two years after the start of the pandemic and with the gyms already fully open, the reality is that it finds itself with a reinforced structure —which implies costs—, but less buoyant forecasts.

Over the last few months, their shares have plummeted and within the company voices have been raised calling for the dismissal of its CEO, John Foley, or even betting on evaluating the sale. At the end of 2021, in November, the firm cut its forecasts for fiscal year 2022 after reporting a slowdown of revenue and subscriptions.

Quite simply, and as the executive herself acknowledged, after the boom of the health crisis, it was finding it difficult to maintain the pace of growth. Of the 50,000 million dollars that it had reached, its market value down to 8,000. And from rising 440% in 2020, its shares went on to plummet 76% in 2021. At the end of January, CNBC He even published that, in this scenario, the company would stop its production as demand fell.

The company also faced other difficulties. Their bikes start from $1,495, a price that rises to 2,495 in the newer models. Over the past few months, it has had to face competition from cheaper options that its users use with the Peloton app. Another hard blow to his image was news of dozens of injuries — and even the death of a child— which forced the firm to withdraw in May 2021 two treadmills, models whose safety he had defended despite user complaints.

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Amazon has been investing in connected health for years. Since the summer of 2020, for example, it has presented several versions of its Halo quantifying bracelet, the last one at the end of 2021. Last year it even signed up the participation of the e-commerce giant in Prime Bike, an exercise bike from the sports firm Echelon Fitness that aimed to become an alternative to Peloton by competing on one of its great handicaps: price. Compared to the more than $1,000 of the Peloton device, the Prime Bike was announced with a price of $500. In September, the manufacturer even slipped that Amazon had embarked on the project, although the Seattle firm left shortly after to disassociate itself and distance itself.

At the end of your first trimester —CNBC notes— Peloton would add close to 2.5 million connected fintess subscribers, a figure that would rise to 6.2 if digital subscribers are taken into account. The news from the Wall Street Journal and Financial Times comes at a key time, with the company just days away from issuing its second-quarter 2022 earnings report.