A Citibank analyst says Apple is sitting on so much cash, a likely change in tax code could see Cupertino use its “Merger and Acquisition firepower.” The most likely target would be Netflix.
Citibank puts the odds of a Netflix buyout at 40 percent, according to analyst Jim Suva in a note to clients titled Addressing the Problem of Too Much Cash.
Apple cash reserves are said to be more than $250 billion, money that is largely overseas and subject to high taxes under current law. However, a proposed 10 percent tax on “repatriated” money could entice Apple to spend a little money, Suva said in the research note first reported this morning on The Fly, a financial news website.
Suva is the second analyst to speculate Apple could be eyeing a deal to transform it into “tech/media juggernaut,” according to The Fly report. Last month, RBC Capital’s Amit Saryanai argued Disney would be the most logical company for Apple to acquire if new legislation freed up the cash.
Suva, also mentions Disney as a potential takeover target. Citi’s analysis looked at strategic fit and potential impact on Shares. Suva put odds on Disney at 25 percent.
Citi also identified Hulu, Tesla, Activision Blizzard, Electronic Arts and Take-Two Interactive but put the at 10 percent or less.
Apple reported growth for a second-straight quarter when it posted its Q2 earnings earlier this week. Revenues exceeded Wall Street expectations, hitting $52.9 billion, though sales in its big moneymaker, the iPhone, were down slightly from this same time last year.
Suva said Apple should spend about a third of its cash on M & A and use the rest of the money to expand its buyback program.