Shannon Stapleton | Reuters
Shares of Peloton soared to a record Tuesday after the company announced plans to buy fitness equipment manufacturer Precor for $ 420 million.
At the start of trading on Tuesday, the stock was at an intraday record of $ 160.56, up 11.2% from Monday’s close at $ 144.39.
Telsey Advisory Group analyst Dana Telsey said she expects the deal to increase Peloton’s annual revenue by $ 480 million to $ 500 million, assuming Peloton retains Precor’s revenues. The deal is expected to close early next year. Upon completion, Precor will operate as a business unit within Peloton and continue to make its own branded products, the companies said.
The deal should enable Peloton to accelerate production and shorten lead times, “which should drive sales and improve the customer experience,” Telsey said in a note to customers. She raised her stock price target from $ 145 to $ 180.
Demand for Peloton’s fitness equipment has skyrocketed during the coronavirus pandemic, straining the supply chain as consumers look for ways to exercise at home. When Platoon reported its quarterly results in November, it warned it would operate under supply constraints “for the foreseeable future”.
Peloton will acquire Precor’s more than 60,000 square feet of production space and add nearly 100 research and development employees.
“Increased production capacity should help alleviate the biggest barrier to growth,” KeyBanc Capital Markets analyst Ed Yruma said in a client note. He raised his target price from $ 160 to $ 185.
Peloton’s shares are up more than 400% to date. The high-end bicycle and treadmill manufacturer has a market capitalization of $ 42.2 billion.