🏃 Peloton’s Bildungsroman?

PTON shares soar after the company announces plans to acquire Precor for $420M

Hey Global Investor, here’s what you need to know before the US markets open.

Market Snapshot 📈

S&P 500 (Monday Close) 3,694.92 −14.49 (0.39%)

NASDAQ (Monday Close) 12,742.52 −13.12 (0.10%)

FTSE 100 (5 PM IST) 6433.70 +17.38 (0.27%)

NIFTY 50 (Today’s Close) 13,466.30 +137.90 (1.03%)

USDINR (5 PM IST) 73.52 (1 Year +4.18%)

Peloton’s Bildungsroman?

If Peloton came of age last year with its IPO, its stock hit the growth spurt in 2020 in no uncertain terms. The company also saw its fair share of chastisement, with customers complaining about subpar services as it struggled to meet demand. PTON has now taken it upon itself to turn the page with the acquisition of Precor.

Background: 2020 has been a transformational year for Peloton. Its stock is up 403% YTD as customers lined up to buy its exercise equipment in lieu of hitting the gym during the lockdown.

The demand was enough for the company to forecast its first billion-dollar revenue quarter this holiday season, while also beating Wall Street consensus for its fiscal Q1. But there have been hiccups. The high demand has come at a price – cracks in its supply chain, complaints about delayed shipping, and poor customer service, as well as underwhelming content.

In response, the company has been investing heavily in creating varied content, roping in fitness influencers, opening new manufacturing facilities, and improving supply chain logistics.

What Happened? Along came Precor, the exercise equipment manufacturer, which supplies fitness equipment to hotels, clubs, and gyms. Peloton has announced it’s acquiring Precor for $420M. A unit of the Finnish sports equipment manufacturer, Amer Sports that’s part-owned by Tencent, Precor has factories in Washington and North Carolina.

The deal will give Peloton some much-needed fillip on the manufacturing front, and allow it to take control of the overall process from design to shipping. The acquisition also adds significant R&D muscle to Peloton with 100 R&D employees joining its current staff.

Peloton sees this deal as the silver bullet that will at once enable it to scale production to meet current demand, while accelerating its penetration of the commercial market that has been Precor’s staple. Peloton expects to close the deal by early 2021. Precor will continue servicing its global network as a business unit within Peloton.

Market Reaction: On Monday, Peloton closed at $144.39, up 3.25%. PTON is up 9.30% in pre-market trading, following the announcement of the Precor deal.

Company Snapshot 📈

PTON $144.39 +4.55 (+3.25%)

Analyst Rating (27 Analysts) BUY 85%, HOLD 11%, SELL 4%

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Later Today 🕒

  • 7.00 PM IST: Gross domestic product revision (SAAR)
  • 8.30 PM IST: Consumer confidence index
  • 8.30 PM IST: Existing home sales (SAAR)
  • Before Market Open: CarMax Inc Earnings (KMX)
  • Before Market Open: Neogen Corp Earnings (NEOG)

Fun Fact of The Day 🌞

Eagles feature prominently on the coat of arms of a large number of countries, such as Germany, Mexico, Egypt, Poland and Austria.

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