Peloton stock price surges 14% to record high on $420 million Precor acquisition

Peloton

  • Peloton shares spiked as much as 14% to a record high on Tuesday, boosting the connected-fitness company’s market capitalization by up to $5.8 billion.
  • The maker of internet-connected exercise machines has agreed to acquire Precor, a leading commercial supplier of fitness equipment, for $420 million in cash.
  • Peloton intends to use Precor’s US manufacturing facilities to ramp up production and improve its delivery times.
  • The company also expects the deal to bolster its innovation and generate more sales of equipment and subscriptions to gyms, hotels, colleges, and other commercial customers.
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Peloton stock surged as much as 14% to a record high on Tuesday after the connected-fitness company struck a deal to acquire Precor for $420 million in cash. The rally added up to $5.8 billion to Peloton’s market capitalization.

Precor makes cardio and weight machines, and ranks among the largest commercial suppliers of fitness equipment in the world. Peloton plans to use the 40-year-old company’s 625,000 square feet of US manufacturing capacity to make more equipment and ship it to domestic customers sooner.

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The takeover will also add nearly 100 people to Peloton’s research-and-development team. Moreover, Peloton hopes it will boost sales of its bikes and treadmills – which are equipped with internet-connected screens to allow users to stream live and on-demand classes – to gyms, hotels, colleges, apartment blocks, and companies that buy exercise equipment for shared use.

Peloton stock has skyrocketed 450% this year as the pandemic has spurred more people to invest in home gyms and online fitness classes. The company’s revenues spiked 232% year-on-year last quarter to $758 million, swinging the company from a $50 million net loss to $69 million in net income.

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However, Peloton’s manufacturing and distribution has been severely restricted this year, resulting in lengthy waiting times for customers. Its Precor purchase is likely intended to help iron out those issues.

Here’s a chart showing Peloton’s remarkable stock-price gains this year:

Peloton stock chart