BMO Managing Director: Apple could be best brand to buy Peloton
Simeon Siegel, BMO Managing Director, discusses Peloton's business and reports of its possible sale to another company.
You can see the full interview here.
Key video highlights
00:34 On companies that shouldn't buy Peloton
01:06 On Apple's position to buy
01:33 On Peloton's brand
DAVE BRIGGS: An interesting letter from Blackwell Capital, though-- and I'm sure you've heard about this-- to Peloton suggesting some of the companies that would be better stewards that should buy Peloton. They threw out Apple, Disney, Sony, Nike, a number of tech streaming Metaverse and sportswear companies. Could they be purchased this year, and who would be a likely candidate?
SIMEON SIEGEL: Great question. Could they? Listen, everything could. I think the question is, should they, and the question is when and why, right? Why hasn't it happened yet? And so if I think about it, one of those companies, right, if we can just quickly go through those companies, one of them is Nike. We have found the athletic brands, Nike, Under Armour, Lulu, all bought connected fitness. And all of them have either walked away from it or written it down. I think we've talked about Lulu's Mirror purchase has gotten less than they hoped for. So I don't know that the athletic businesses want to get involved.
Amazon is obviously already connected with the business. Amazon, on the other hand, is in the business of moving a lot of products that's not brand enhancing. So to the question of if they believe the TAM is large, but the brand can be eroded while doing it, then potentially, right? But what does Amazon get that they don't already have right now and that they're already selling the product? So that's them.
Apple, from a branding perspective, I guess makes sense. I think the question I've always wondered-- and I don't cover Apple-- has always been, why wouldn't they have picked up this company earlier, right? If we're talking about just order of magnitude where Apple was during the COVID and where Peloton was during COVID, Peloton was up and to the right. Peloton had the eyeballs of everyone that they would have had. The engagement now has declined. The perception now has declined. So if you didn't buy before, are you looking now?
Again, I don't know, but just throwing out the thought process that at least I would have when thinking about this. I think right now, Peloton is doing an excellent job flipping their own problems, working on the restructuring, cutting fixed costs. And I think the question is, does that lead to growth or not? You can be a healthy brand. You can be a smaller brand. And the reality is right now, you're getting a lot of credibility from Wall Street at $5 and 1/2 billion market. There's worse things in the world.