Should Apple acquire Peloton in 2024? 2 things investors need to know.

Let me say this Peloton Interactive (PTON 0.34%) fought hard would be an understatement. After experiencing monster success during the height of the pandemic, the business has fallen on hard times with weak demand, declining sales and continued net losses.

To address these notable issues, it might make sense for Peloton to be acquired, which could put it on a better financial path. And maybe that pretender should be Apple (AAPL 1.37%)the dominant retailer of consumer technology.

Here are two things investors should know about this speculative business.

1. Apple would be a great buyer

Apple sells incredibly popular hardware products like iPhones, iPads, and MacBooks that are backed by its own proprietary software offerings. Peloton operates a similar playbook. However, Apple has achieved tremendous success. And it’s insanely profitable, boosted by a strong and proven brand pricing powersomething Peloton so desperately wants to have.

To be clear, Apple already has a helping hand in the wellness space. The Apple Watch and the Fitness+ app are its key offerings here. And CEO Tim Cook even went so far as to say that the company’s biggest contribution to humanity “will be about health.” You could easily argue that Peloton feels the same way about its own business.

From a strategic perspective, buying Peloton could make sense. It would add to the more than 2.2 billion active Apple devices worldwide. Peloton users are also likely to come from higher-income households that Apple could cross-sell to. And Apple could collect more fitness data that could support its health ambitions.

There are also exciting integration opportunities. If a consumer signs up and pays for Peloton equipment with an Apple card, they may be offered a discount or other incentives. Fitness+ and Peloton digital apps could be combined. And Apple Music could provide the songs for Peloton’s various training classes.

In its most recent fiscal quarter (Q3 2024, ended June 29), Apple reported net income of more than $21 billion. And it currently has $52 billion in net cash balance sheet. Even though Peloton sold for a huge amount compared to its current market cap of $1.1 billion, Apple could easily afford the deal.

2. Peloton is too small

Based on what I just outlined, the deal makes sense. Apple would be a worthy buyer that Peloton shareholders can support. However, it is also easy to believe that a purchase will not happen.

Despite being a huge $3.2 trillion business, Apple’s corporate strategy isn’t really focused on making huge acquisitions. In 2014, the company closed its biggest deal when it acquired Beats for $3 billion. The price to buy the Peloton would probably be in the same neighborhood. It’s anyone’s guess that executives would be comfortable doing this when they could continue to use excess cash to buy back shares and pay dividends.

But I can understand why Apple shareholders would agree to such a deal. Even if it happened and became a waste of capital, Cook and his team at least took a chance on something that seemed to make strategic sense. Apple could easily face financial loss in the worst case scenario.

There’s also the fact that Peloton is tiny by comparison, bringing in $2.7 billion in revenue over the past 12 months, compared to Apple’s $386 billion in the 12-month period. Peloton doesn’t seem to be able to move the needle for the tech giant, even though its sales have skyrocketed under Apple.

Apple wants to sell products that target the entire global population. Peloton does not fall into this category. While I’m not sure a deal will ever be on the table, the exercise business would certainly benefit more if it did happen.