Peloton (PTON) stock jumped by nearly 30% in after-hours trading after a Wall Street Journal report mentioned that Amazon (AMZN) might be amid the buyers eyeing a potential purchase.
While the report made it clear that any potential deal is far away and may not take place at all, sources close to the company told the WSJ that Amazon has been speaking to advisers about the exercise bike maker. The e-commerce giant is one among several potential buyers looking at the company.
What Makes Peloton So Attractive?
Worth around $8 billion, Peloton has had a difficult year after an initial surge in sales early in the pandemic. In the last year, stock fell 83% and by November amid a gradual return to normalcy and a series of bad PR moments — in May, the company recalled 125,000 treadmills amid safety issues while, in December, the "Sex And The City" TV sequel show "And Just Like That" showed popular character Mr. Big dying on a Peloton bike.
"Morale is at an all-time low," one employee told CNBC amid news that the company had halted hiring and cut its full-year outlook in January. "The company is spinning out so fast."
All of that, however, does not diminish the rapidly-growing demand for home fitness and Peloton's popularity among a well-heeled demographic who can afford $1,495 bikes. In an effort to tap into this market, Amazon had recently offered financial backing to home gym startup Tonal and launched the Halo View health tracker and Halo Fitness virtual classes this year.
"Is a revenue-compressed Peloton expense-restructuring story (this early) exciting?" BMO Capital Markets analyst Simeon Siegel wrote in an investor note last week. "We have more questions than ever."
Stock Jumps On Speculation
Surging Peloton stock reflects confidence that an Amazon takeover could breathe new life into the product — everything from slowing subscriptions to the supply chain problems gripping most technology companies are likely to benefit from the e-commerce giant's resources.
"It's not immediately clear what Amazon would do with Peloton’s hardware and technology, but it's possible Amazon could integrate Peloton’s offerings into its growing devices unit, which houses its popular Fire TV streaming sticks, voice-activated Echo smart speakers and an expansive lineup of connected home products," reads the WSJ report.
Amazon shares, meanwhile, were already up 13.54% Friday after the company announced that it was raising the price of its Prime membership.
