Given that Apple has been dominating the headlines lately with the announcement of its new iPhone 8 and iPhone X, we thought we’d look back at what some analysts say are good acquisition targets for Apple.
According to Citi, the online content company is the best fit in its future strategy, and could boost Apple’s stock up to 20%. The purchase of Walt Disney also makes sense for the group led by Tim Cook.
Apple’s cash reserves amount to about $250 billion. That’s bigger than the GDP of many nations (whom I wont name specifically 😉
Apple has become the largest stock company in the world. Its market cap is a colossal size, no less than $816 billion dollars, after increasing more than 36% so far this year. Its securities are trading at $159.65/share.
Following the latest presentation of its quarterly results, the Factset consensus has raised its average valuation to $175 per share. This price would give it a market value of $904,000 billion dollars.
Last quarter, Apple gained $8.7 billion, more than the $ 8.2 billion forecast by investors. The tech giant also recorded a 7% increase in sales, which amounted to $45.41 billion, and a quarterly net profit of $1.67 per share.
However, Citi experts, who recommend “buying” their shares, valued at $170, claim that “as Apple has grown in size, sales growth and earnings per share (BPA) are softening “.
These analysts add, however, that Apple has a net cash position of about $250 billion, which is growing every year at a rate of $50 billion.
Trump is encouraing companies to return to the United States and if the repatriation rate is 10%, Apple would have $220 billion for corporate operations or share repurchases. ”
Tim Cook has not made any significant acquisitions in its history, as it is committed to organic growth as the main lever of increasing revenue.
In any case, there’s a first time for everything and the most attractive companies for Apple are Netflix, Disney and Hulu in the media and content sector; Activision, Take Two and Electronic Arts in the video game business; and Tesla, the electric car manufacturer founded by Elon Musk.
Citi applies several filters to these companies, such as the strategic fit in Apple, its global scale, its size in the stock market, its strategic assets and the impact of the oacquisition on the actions of the iPhone maker. Thus, they give a 40% chance that the company bought is Nefflix, 25% to Disney, 10% to Activision, Electronic Arts and Take Two, 5% to Tesla and 0% to Hulu.
In the case of Netflix, its stock market value is about $78 billion, while Disney is a giant at $167 billion. That said, Apple has financial capacity even to buy both companies.
Citi’s conclusion is that it would be best for Apple to devote one-third of its cash position to acquisitions in case it repatriates its cash to the United States. That is, make one or several purchases worth 70,000 – 75,000 billion dollars.
The rest of the money, $140 billion – $ 150 billion, Citi would allocate to buy back shares, which would reduce the number of securities in circulation and boost the technology giant’s earnings per share. If Apple opted for a similar strategy, it would boost its revenue, increase its profits faster, and raise its current market value by up to 20%. Not bad for the biggest company in the world.