Peloton's CEO is stepping down, adding to mounting evidence that the company is looking to sell. Despite the upsides for a company like Nike, analysts say buying Peloton is still a bad idea.

• Peloton CEO John Foley will step down, which analysts say means it's more likely Peloton will sell.
• Amazon and Nike are both reportedly exploring the possibility of buying Peloton.

Peloton's CEO is stepping down, adding to mounting evidence that a sale is in the company's future, Wall Street analysts say.

John Foley announced Tuesday he will step down as CEO of the company he founded in 2012 and become Peloton's executive chair. Barry McCarthy, the former CFO of Spotify and Netflix, will replace him. The company will also lay off 2,800 employees, or roughly 20% of its workforce, as part of cost-cutting measures amid slowing demand for at-home fitness products like the company's connected bike and treadmill.

The changes add fuel to Wall Street speculation that Peloton could be considering a sale.

"Foley leaving makes it more likely that Peloton ultimately sells the company and the board clearly has major decisions to make in the days/weeks/months ahead," Wedbush analysts Daniel Ives and John Katsingris wrote Tuesday. "If a bidding process begins, we view Apple as the likely acquirer due to the clear strategic fit with its healthcare/fitness/subscription initiatives while Amazon and Nike among others could be potential bidders in the mix."

Their predictions come on the heels of multiple reports that several companies are eyeing Peloton.

The Wall Street Journal reported Friday that Amazon has already spoken to advisors about a possible acquisition. The Financial Times reported one day later that Nike is in the early stages of exploring the purchase. Peloton stock jumped 25% on Monday following the reports that Amazon and Nike may be interested in a deal.

While Nike buying Peloton could have major upsides, it's the wrong move for the sportswear giant, Wedbush analysts Tom Nikic and Ezra Weener wrote in a report published Sunday.

For one, it would give Nike a new way to interact directly with existing or potential customers. Peloton offers live and on-demand fitness classes for bike and treadmill users, and those who don't own the company's fitness equipment can sign up for a standalone subscription as well. Peloton has said it expects to have between 3.35 million and 3.45 million subscribers by the end of fiscal year 2022.

Buying Peloton would also block Nike's competitors from doing future apparel or footwear collaborations with Peloton. While Peloton recently launched its own private-label apparel brand, it had previously teamed up with Adidas and Lululemon on Peloton-branded apparel (although Peloton and Lululemon are currently locked in a legal battle over patent infringement and unlikely to collaborate again).

Another benefit to Nike is Peloton's technical expertise. Nike already has patents for fitness equipment, as evidenced by its recent patent infringement suit against Lululemon's Mirror Home Gym. Buying Peloton could allow Nike to make good on existing patents.

Still, buying Peloton is the wrong move for Nike, the analysts say. Peloton already loses a significant amount of money, and at-home fitness may be fading as the pandemic gradually subsides and future lockdowns look unlikely.

Plus, Peloton's public perception has taken a hit: fictional TV characters keep dropping dead after riding their Peloton bikes, and the company had to recall its treadmill following multiple reports of injuries and the death of a child.

Those factors combined make it the wrong move for Nike, the analysts said.

"We think there's a lot to like about NKE, but a potential PTON acquisition isn't one of them," they wrote. "We're skeptical that a deal would even make strategic/financial sense, given the hefty losses NKE would have to absorb and the fact that it may detract from the company's robust growth opportunities in its core business."

"We'll continue to monitor the situation, but for now, we think it's mostly 'noise,'" they added.