Dive Brief:

• Amazon and Nike are considering bids to acquire fitness company Peloton, according to reports Friday from The Wall Street Journal and Financial Times. Other suitors could include Apple or private equity firms, the Financial Times said.
• The potential bids come just a couple of weeks after Blackwells Capital, an activist investor with a "significant" share in Peloton, urged the company to consider a sale and called for CEO John Foley to be fired over "multiple leadership failures."
• An Amazon spokesperson said the company does not comment on rumors or speculation. Nike and Peloton did not immediately respond to requests for comment on the situation.

Dive Insight:

Peloton has not had a smooth ride recently. Over the past three years, Peloton has recorded net losses of $189 million (for fiscal 2021), $71.6 million (for fiscal 2020) and $195.6 million (for fiscal 2019). Revenue over that period has increased from $915 million in 2019 to over $4 billion in 2021.

So far in fiscal 2022, the company's track record of losses has continued, recording a $376 million loss in Q1 and projecting a net loss of between $423 million and $481 million for its second quarter, ended Dec. 31. (The company reports Q2 on Tuesday.)

It's not just profitability that has been dogging Peloton. The company launched its own private label apparel brand in September, only to become embroiled in a lawsuit with Lululemon, which alleged the fitness company stole its apparel designs. CNBC in January then reported the company had stopped production of some of its products in the face of waning demand. Foley replied in a note to employees that those assertions were false and said it was "resetting our production levels for sustainable growth."

Those struggles are culminating now in calls to sell itself. In its open letter to Peloton, Blackwells Capital specifically named Apple, Disney, Sony and Nike as potential acquirers, in addition to "any number of technology, streaming, metaverse and sportswear companies."

For Nike, the potential interest in acquiring Peloton could be to bolster its connected fitness network. The company already has multiple fitness apps and a host of workout content it offers members. Also, as Wedbush analyst Tom Nikic pointed out in emailed comments, Nike has already filed patents for at-home fitness equipment (and in fact sued Lululemon over its Mirror division for that reason). But Peloton's hemorrhaging of money, and uncertainty around the at-home fitness market, make it an uncompelling case.

"We think there's a lot to like about [Nike], but a potential [Peloton] acquisition isn't one of them," Nikic said. "First off, it sounds like things are simply in the exploratory stage right now, and it's very possible that nothing materializes. Secondly, we're skeptical that a deal would even make strategic/financial sense, given the hefty losses [Nike] would have to absorb and the fact that it may detract from the company's robust growth opportunities in its core business."

BMO Capital Markets' analysts led by Simeon Siegel and Daniel Stroller also noted that athletic companies have backed away from offering athletic hardware like Peloton's in the past. Outside of just Nike, the analysts also questioned what kind of value Peloton "would bring any of the cited companies, given its comparably small size, faltering demand, and declining engagement."

To Amazon, which just raised the price of its Prime subscription to $139 annually, Peloton could offer an additional perk for members. Rohit Kulkarni, managing director at MKM Partners, noted that fitness could "be viewed as the next consumer experience to be digitized, after books, music, video, and video games." However, Peloton's premium positioning goes against Amazon's strategy, Cowen analysts said in their own comments on the reports. They noted that Amazon offers tablets, e-readers, Alexa speakers and fitness devices for about $100 compared to Peloton's nearly $1,500 entry-level bike.