If tech giant Apple (AAPL) needed a nudge to bid for fitness-equipment maker Peloton (PTON), it just got one.
Wedbush in a note on Monday said, "we would be shocked if Apple is not aggressively involved in this potential deal process."
Peloton's market capitalization has slumped, as market demand for and sales of its extravagantly priced connected-fitness bikes and treadmills have waned.
Nonetheless, Wedbush analysts Dan Ives and John Katsingris wrote in a note, Peloton still has a strong brand and a loyal customer base that makes it an attractive asset for companies like Apple with others like Nike (NKE) and Amazon (AMZN) also in the fray.
Catalyzing Health Initiatives
"For [Chief Executive Tim] Cook & Co, acquiring Peloton would be a major strategic coup and catalyze the company's aggressive health and fitness initiatives over the coming years," they wrote.
Apple, Cupertino, Calif., made inroads into the fitness space with its Fitness+ subscription service in December 2020.
"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 further explained.
Wedbush pegged the takeover of Peloton, New York, to be in the $12 billion to $15 billion range, depending on timing and the competitive process.
"With approximately 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," Ives wrote.
Wedbush also added that if an Apple rival got its hands on Peloton, it would present a business-model risk for Apple's healthcare segment and future endeavors.
"Apple may be forced into this deal if Amazon, Nike or potentially Disney (DIS) aggressively goes after Peloton in a defensive blocking strategic move," Ives said.
Apple, which has invested heavily in fitness, has been floated as a potential buyer of Peloton's business, TheStreet reported last month.
Tech news website The Information also made a case for an Apple Peloton deal in a report in January.
"If Peloton is to have a future, it would be better off as part of a bigger, more diversified company. Apple is an ideal candidate to take on that project. It has the Fitness+ subscription service for classes and it markets the Apple Watch as a device that can help with jogging and other exercise activities," the Information reported.
While discussing other potential bidders Wedbush noted that "on the defensive front, if Peloton was acquired by Amazon or Nike this would propel the winning bidder on the health and fitness front as well as gain a major foothold into the living rooms of consumers globally."
Apple's Service, Subscription Lines Grow
Apple's services business performed better-than-expected and clocked $18.3 billion in revenue, a 26% jump year over year, Cook noted in the October earnings report.
"Also, paid subscriptions continue to show very strong growth. We now have more than 745 million paid subscriptions across the services on our platform, which is up more than 160 million from last year, and nearly five times the number of paid subscriptions we had less than five years ago," Chief Financial Officer Luca Maestri said.
Peloton shares at last check were 18% higher at $29.06.
Wedbush has an outperform rating for iPhone giant Apple with a price target of $200 a share. At last check Apple stock was trading little changed at $172.50.
