Inevitable downturns are part of the investment process; however, we see no reason to alter our enth...
Who Could Apple Acquire?
05/12/2017 2:45 am EST
The world continues to talk about the prospects. Let’s break down the potential reality. Indeed, I believe there may be as good as 40% odds that Apple acquires Netflix.
The research arm of the investment bank Citi released a report with seven potential merger and acquisition targets for Apple. Tops on the list is Netflix. Elon Musk’s Tesla (TSLA), on the other hand, is only 5% likely.
The full list of acquisition targets includes three media firms, three game developers, and, of course, one car manufacturer. Disney (DIS) and Hulu are the media firms joining Netflix, while Activision Blizzard (ATVI), Electronic Arts (EA), and Take-Two Interactive (TTWO) are the gaming companies.
Netflix makes a ton of sense, of course, as the company dominates streaming media both domestically and abroad.
Disney has a strong list of properties as well, but slightly more oriented to traditional media consumption, whereas Netflix is well-positioned to take advantage of the continuing trend to cut the cord (cord-cutting has jumped 5x). Plus, Disney is worth $177 billion, whereas Netflix is worth $67 billion.
The future of TV consumption swings in the balance as the world moves away from traditional cable to the internet. Netflix is the powerhouse making the company a coveted asset in media.
On track to do $10 of EPS by 2020 we see compelling value in the shares as a standalone entity even at current levels. A take-out could offer huge upside.
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