Apple (AAPL) -) has started the New Year in not the strongest fashion.
Shares of the Cupertino, Calif., tech giant have dipped more than 5% in the past week amid two high-profile stock downgrades.
Analysts with Barclays dropped their price target to $160, citing concern about iPhone demand in a more competitive smartphone environment. Not long after, analysts at Piper Sandler cut their price target by $15 to $205, contending that "growth rates have peaked for unit sales."
And Microsoft is now nipping at its heels for the position of most valuable company.
Shares of Apple at last check Friday were little changed just above $182.
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Not all analysts have taken a dour outlook on the stock. Wedbush Securities analyst Dan Ives has predicted that Apple will shoot beyond a $4 trillion market cap this year.
And Deepwater Management's Gene Munster expects this year to be a strong one for Apple, with the coming release of the Vision Pro headset, artificial intelligence upgrades on their way to the Siri virtual assistant, and what he expects to be at least one big-name acquisition: Peloton (PTON) -).
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Why Peloton makes sense for Apple
The stars, Munster said, are lining up for Apple to acquire Peloton, the connected exercise-and-fitness company whose stock has fallen hard from pandemic-era highs. In 2021 shares of Peloton were trading above $150; the stock at last check was up 1.7% at $6.23.
Peloton, Munster told CNBC, is a hardware, software and services company, a trifecta for which Apple has become well-known. And Apple, meanwhile, is working to expand its subscription revenue.
The tech giant currently has six subscription products: Apple Music, Apple TV Plus, Apple News, Apple Arcade, Apple Fitness and iCloud Plus. Together they account for roughly $16 billion in total revenue, 4% of Apple's overall revenue.
If the company is able to maintain Peloton's roughly 3-million-strong user base, which brings in about $1.7 billion in revenue, Apple could add around 11% to its subscription piece, according to Munster.
"It was almost five years ago today that (Apple CEO) Tim Cook famously said that Apple's greatest contribution to humanity will be related to health," Munster said. "They've been teasing around Apple Watch; they have a fitness product that basically no one uses. And this is an opportunity."
Plus, the stock is cheap.
"If Apple pays a 50% premium, they'd be paying two times subscription revenue. Apple's trading at seven times revenue," Munster said. "If you're trading at seven times revenue and you can buy a business that fits nicely in for two times revenue, you make that acquisition."
"So I think this is the year," he added.
The average analyst price target for Peloton is $7.38, implying a bit of possible upside.
On Thursday Peloton launched a partnership with TikTok to bring its fitness content to the short-form-video platform.
Contact Ian with tips via email, ian.krietzberg@thearenagroup.net, or Signal 732-804-1223.
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