Why Apple Won’t Acquire Peloton

Peloton’s subpar technology and inability to follow consumers wherever they go make the connected fitness leader an unattractive acquisition candidate for Apple, according to Needham analyst Laura Martin. 

• “Apple has said no to anything that isn't mobile. 100% of what they do follows the consumer 20 hours a day, every waking hour. Pelotons don't do that,” said Martin in an interview with Voices of Wall Street.

Tech gap: In addition to mobility, Apple is seeking technological innovation that goes beyond a screen attached to a stationary spin bike, says Martin. With a market cap of about $26.5 billion, Peloton would hardly put a dent in Apple’s cash pile of nearly $200 billion. Despite Apple’s liquidity, Martin says Peloton’s technology is a turn-off for Apple. 

• “It's not techie enough. I mean, the stuff that Apple is doing with Apple Silicon, they now own the chip, they bought the chipmaker, is super high tech futuristic. You know exercise equipment, not so much. Peloton is super-techie, awesome for a stationary bike, like we aren't in the same league. 

Budding fitness rivalry: Speculation that Peloton could become a takeout target by Apple picked up momentum when the iPhone company announced the launch of Fitness+, Apple's new fitness app that costs $10/month, on September 15. Martin told VoWS that the new app could steal subscribers from Peloton’s paid app-only offering, which grew 210% y/y to over 316,800 subscribers in the latest quarter. 

• “It's smart of them to introduce a $10 service. My gut feel is they lose $3 on every single one of those subscribers because Peloton has an exactly comparable $13 service and they break even. So I think Apple will take subs from Peloton and I think in that aspect they compete.”