Shares of Peloton (PTON) are in the spotlight following media reports saying Apple (AAPL) is developing a new subscription for virtual fitness classes that will be offered in a bundle that would be a rival to virtual classes offered by the company. Commenting on the news, Cowen analyst John Blackledge told investors he believes any potential service would not likely threaten Peloton's leadership in at-home connected fitness.
'APPLE ONE' SUBSCRIPTION BUNDLES: Apple has plans for a series of bundles, dubbed "Apple One" inside the company, to let customers subscribe to several of the company's digital services at a lower monthly price, Bloomberg's Mark Gurman reported, citing people familiar with the matter. The bundles are expected to launch as early as October alongside the next iPhone line and are meant to encourage customers to subscribe to more Apple services, the report said.
The plan is a bid by Apple to achieve the same loyalty that Amazon.com (AMZN) has won with its Prime program, according to Gurman, who adds that the next iOS 14 software update for Apple's devices will allow the iPhone and iPad to suggest different packages to users based on which Apple apps and services they already use.
Apple is also developing a new subscription for virtual fitness classes that will be offered in a higher-end bundle with the rest of Apple's services, the author noted. The workout package, codenamed "Seymour," would be a rival to virtual classes offered by Peloton and Nike (NKE), according to Gurman's sources.
NOT LIKELY A THREAT TO LEADERSHIP: Commenting on the press report indicating that Apple may release a virtual fitness subscription in October, Cowen analyst John Blackledge told investors that he believes any potential service would not likely threaten Peloton's leadership in at-home connected fitness, given its vertically integrated platform and highly passionate, growing user base across Bike, Tread, and expected additional hardware offerings. Blackledge reiterated an Outperform rating and a $70 price target on Peloton's shares.
WHAT'S NOTABLE: Citing a person familiar with the matter, CNBC's Christina Farr reported back in March that Apple was developing a new iPhone app with the codename "Seymour" that would guide users through exercise routines on their Apple Watches and iPhones. The project is the brainchild of Jay Blahnik, the fitness instructor and author who joined Apple in 2013, Farr added. The app is slated to launch in iOS 14 and the next version of the Apple Watch software, the author noted.
On March 13, just a couple of days after the initial news reports on "Seymour," Andrew Left's Citron Research issued a short report on Peloton, claiming the shares will drop 80% in the next 52 weeks. The firm had a $5 price target on the stock at that time. Apple's new operating system will contain Apple-produced guided workout videos from "cycling to yoga," Citron highlighted in the report, adding that the workouts can integrate with iPads, Apple watch, or Apple TV.
The "dream of Peloton becoming the official platform of home health will soon be a distant memory like when GoPro (GPRO) was going to be our platform for 'life logging,'" the short selling firm argued. "With a potential recession on the horizon, selling $2k bikes with a $39 a month subscription might not be the best business model," the short-seller contended.
PRICE ACTION: In Thursday morning trading, shares of Peloton have gained 1.5% to $65.33 after having initially declined in apparent response to Gurman's reporting on Apple's plans.
Peloton
+1.39 (+2.16%)
Apple
+8.3 (+1.84%)
Amazon.com
+48.08 (+1.52%)
Nike
+0.87 (+0.83%)
GoPro
+0.175 (+3.66%)