Written by Brenda Nakalema

Peloton stock soars as takeover reports heat up. Here’s what it might be worth.

Peloton interactive stock was flying high on reports that multiple companies, including Nike and Amazon.Com, were interested in acquiring the …

Peloton interactive stock was flying high on reports that multiple companies, including Nike and Amazon.Com, were interested in acquiring the hard-pressed stationery- bike maker.

Peloton stock (ticker: PTON) gained 32% to $32.40 even in the face of reports that it was now a takeover target. The stock fell by 31% in 2022 and 84% over the previous year as of Friday’s close amid dropping sales of the company’s connected bikes, treadmill recalls, and other issues.

On Friday, the wall street journal reported that Amazon was listed among the peloton bidders, while the Financial Times reported that Nike was also on that list. Meanwhile, a Wedbush analyst, Dan Ives, said he “would be shocked if Apple is not aggressively involved in this potential deal process.”

As if all this chaos wasn’t enough, Peloton is meant to release its earnings report on Tuesday. However, the numbers will probably be less important than the information it releases about cost cuts, production, and other issues.

Even then, the takeover will take centre stage. Amazon (ticker: AMZN) makes sense as a potential suitor since Peloton uses Amazon Web Services, plus its chief technical officer was a presenter at AWS conferences. Rohit Kulkarni, an MKM analyst, said, “In other words, Amazon and Peloton have had a working relationship. Arguably, fitness can be seen as the next consumer experience to be digitized, after books, music, video and video games.”

The main question for investors of course, is Peloton’s actual worth. Using Netflix (ticker: NFLX), Roku (ticker: ROKU), and Lululemon Athletica (ticker: LULU), which trade at 5.5 to 6 times next- fiscal year revenue and 25 to 35 times next fiscal year EBTIDA- earnings before taxes interest and depreciation- as benchmarks would place Peloton stock at $34 to $36 basing on fiscal 2023 sales of $5 billion and EBITDA of $350 to $450 million.

The other alternative would be to compare the company to FitBit, which was previously acquired by Alphabet (ticker: GOOGL) in 2019. Alphabet paid 1 times enterprise value/ sales. Still, Kulkarni believes that Peloton deserves a multiple of 2.7 times EV/ Sales simply because Peloton’s “business model and it’s overall value proposition deserve a clear premium to FitBit.” This alone would place Peloton’s price tag at roughly $30.