Why This Peloton Analyst Says An Apple Fitness Subscription Poses Little Threat

Apple Inc. AAPL is reportedly planning to launch a bundled service for subscription by October that includes a fitness app subscription for the higher end. 

Although Apple’s fitness app would compete with Peloton Interactive Inc’s PTON digital-only subscription offer, it may have a limited impact on the company’s connected fitness base, according to BofA Securities.

The Peloton Analyst: Justin Post maintained a Buy rating on Peloton Interactive with an unchanged $72 price target. 

The Peloton Thesis: Apple’s new fitness app will be available on the company’s devices, like the iPhone, iPad and Apple TV, while Peloton’s offerings are solutions for bikes and treadmills, Post said in a Friday note. (See his track record here.)

Peloton’s digital-only subscription revenue represented only 1% of total revenue in the third quarter, he said, adding that the biggest value in digital subscribers for the company is their potential conversion to connected fitness subscribers.

"Longer-term, it is unclear whether Apple would partner with other at-home fitness hardware companies, or create its own proprietary bike/tread, though we think former is more likely than the latter."

Peloton's bike delivery wait times suggest a robust order backlog, while BofA’s app download data indicates that guided workout app downloads grew 220% year-on-year in July and are up 6% sequentially.

PTON Price Action: Peloton shares were down 0.59% at $65.32 at last check Friday. 

Related Links: 

Why Peloton's Stock Is Trading Higher Today

Apple Prepping Subscription Bundles To Boost Recurring Revenue: Report

Photo courtesy of Peloton.