There’s an easy way for Apple to make its rumored streaming video service a hit: buy Netflix. That’s the suggestion of an analyst from J.P. Morgan, who admits it would be very expensive.
And the analyst has recommendations for two other big Apple acquisitions.
Apple TV + Netflix
While it’s very hush-hush about plans, it’s an open secret that Apple is prepping a streaming video service. It has already agreed to fund dozens of TV shows and movies.
Analyst Samik Chatterjee from J.P. Morgan sees potential value in the iPhone maker launching such a service: He wrote in a note to investors this morning “We believe Apple can drive synergies between its leading position in smartphones and the rapid transition of video consumption to mobile to drive stronger services growth.”
But any nascent service is going to face tough competition from established companies. Apple has a whopping $250 billion in cash, and Chatterjee says a large percentage of this stockpile should be spent buying one of its potential competitors:
“We think Netflix is best strategic fit on leading position in engagement level as well as original content, differentiating itself from pure aggregators of content. We believe there is value to acquiring the most successful player in this space, which is hard to replicate with a smaller player in this market.”
J.P. Morgan is far from the first to suggest an Apple/Netflix team up. Rumors of such a merger go back to at least 2017.
The Apple TV streaming service, bundled with Apple Music and a magazine subscription service, would be a boost for Apple’s share price, according to Morgan Stanley analysts.
Other big-name potential Apple acquisitions
Apple should invest some of its cash stockpile into buying a couple of other well-known companies, according to J.P. Morgan’s Chatterjee. He recommends gaming company Activision Blizzard, for example.
The analyst also suggests Apple acquire Sonos, who makes high-end speakers. This could benefit future versions of the HomePod smartspeaker.
These purchases would eat significantly into Apple’s cash. Chatterjee says Netflix could cost as much as $189 billion. The other two would be less costly, even with a premium added to their market capitalization. Activision Blizzard is worth $35.7 billion, while Sonos is just $1.3 billion.