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Peloton Stock Surges Amid Reports of Takeover Interest From Amazon, Nike

Amazon and Nike are reportedly eyeing a potential takeover of connected fitness equipment maker Peloton, sending shares sharply higher in pre-market trading.

Updated at 1:03 pm EST

Peloton  (PTON) - Get Free Report shares surged higher Monday following multiple media reports that suggest Amazon  (AMZN) - Get Free Report is preparing a potential takeover bid for the connected fitness equipment maker.

Amazon is said to be exploring talks with senior Peloton officials, amid separate reports that activist investors at Blackwells Capital LLC called for the firing of CEO John Foley, and the potential sale of the company, in the wake of last week's multi-billion sell-off following reports of production halts and cratering customer demand.

Britain's Financial Times also reported potential interest from Nike  (NKE) - Get Free Report, one of the companies pushed by Blackwells Jason Aintabi as a possible suitor.

"We believe the pandemic offered Peloton a tremendous and unexpected opportunity to accelerate consumer adoption of its category-defining products and drive performance of the business and value for shareholders," Blackwells said in a letter to Peloton that was viewed by TheStreet. "With the stock now trading below the IPO price, and down more than 80% from its high, it is clear that (Peloton), the executives and the board have squandered this opportunity."

Peloton shares were marked 15% higher in early afternoon trading Monday to change hands at $28.22 each, a move that would still leave the stock down more than 81% from its pre-Christmas peak.

Peloton published preliminary second quarter earnings projections on January 20, which included revenues of $1.14 billion and adjusted EBITDA in the region of -$270 million to -$260 million, firmly inside prior guidance of a loss of $350 million. 

CEO Foley said at the time that the group was "considering all options ... to make our business more flexible", adding that its taking "significant corrective actions to improve our profitability outlook and optimize our costs across the company."

Peloton will publish its full December quarter earnings on Tuesday.

"Based on our view of the fundamentals, we remain wary about the value Peloton would bring any of the cited companies, given its comparably small size, faltering demand, and declining engagement," said BMO Capital Markets analyst Simeon Siegel, who carries an 'underperform' rating with a $24 price target on the stock.

"Although Peloton's star was propelled during Covid, it's become increasingly clear it's a much smaller (still impressive) business than prior perception," he added. "As such, one has to ask whether the brand is simply too small to make a difference to the world's largest companies."