PTON Hits Record Highs on Buyout Buzz

Peloton announced plans to acquire Precor for $420 million

Assistant Editor
Dec 22, 2020 at 11:01 AM
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The shares of Peloton Interactive Inc (NASDAQ: PTON) are surging this morning, last seen up 12.5% at $163.31, after it was revealed that Peloton will acquire Precor, a rival fitness equipment maker, for $420 million. The deal is expected to close in 2021. Telsey Advisory Group said it sees potential for Peloton's annual sales to increase anywhere between $480 and $500 million. Additionally, KeyBanc raised its price target to a street-high $185, noting its long-term growth potential and calling the acquisition "highly synergistic." Earlier today, PTON hit all-time high of $166.23, and is now on pace for its seventh-straight win. 

Altogether, PTON earned at least four bull notes following the acquisition news, and the majority of analysts were already optimistic toward the security coming into today. In fact, 20 of the 23 in coverage held a "buy" or better. Meanwhile, the stock's 12-month consensus target price of $139.46 is a 12.6% discount to current levels.

Peloton stock is on track for its fourth consecutive record close. Due to the increasing demand for home workout options, the security has been a pandemic staple, and is now trading more than nine times the level it was during the broader market's mid-March pullback. PTON's 80-day moving average has helped springboard the equity higher, catching a small pullback in November. Longer term, Peloton stock is up 452% year-to-date.

Today's option pits, meanwhile, are seeing plenty of activity. So far, 91,000 calls and 55,000 puts have crossed the tape --  four times the average intraday amount, with volume pacing in the 99th percentile of its annual range. Most popular is the weekly 12/24 165-strike call, followed closely by the 160-strike call from the same series, with positions opened at both.

For those looking to speculate on PTON's next move with options, premiums are quite affordable at the moment. The security's Schaeffer's Volatility Index (SVI) of 68% sits in the low 7th percentile of its annual range. This means option traders are pricing in relatively low volatility expectations.

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