Apple recently released its financial results, and it is now known that makers of iPhone have a humongous $250 billion cash reserve. Many immediately started pondering various ideas of what could be done/bought with that kind of money, however, top analysts took the matter seriously with a more realistic approach.
Jim Suva, the Citibank analyst, claims that Apple will most likely spend a considerable part of those reserves on a new acquisition as that is the wisest thing to do. Among various potential ‘acquisitions’ we stumbled upon names such as Netflix, Disney and Tesla.
Having listed three potential purchases, it has to be said that Tesla is the cheapest at the moment, at least when it comes to market capitalization. Tesla, run by Elon Musk, a young business magnate of South African origin, recently overtook fierce rivals that go by the name of ‘Ford and General Motors with the market cap of $52.84 billion at the close of Friday trade on Nasdaq. You might think that it is impossible to call Tesla ‘cheap’ in any possible way but Netflix, for example, has a market cap of $67.22 billion at close of trade and Disney (its shares are traded on the New York Stock Exchange) is estimated to have even higher value, more than $178 billion.
Now that you know how things really are you can realize by yourself that all three companies are fairly within Apple’s ability. If Cupertino-based giant buys two of them, it will still have a lot of cash in the bank. On the other hand, it is still unknown whether any of these companies will consider selling/merging themselves to Apple.
For example, Tesla recently revealed its own ‘earnings call’ and they revealed that they were already automating the process of production for their upcoming Model 3 sedan. Elon Musk also said in an interview that he plans to make Tesla as valuable as Apple. With that kind of mindset, we aren’t so sure that a purchase is in store, at least not in the near future but it is a common saying that everything has a price, so we’ll sit back and observe how the situation pans out.
Four more potential ‘targets’ for acquisition by Apple, according to the Citibank are Hulu, Take Two Interactive Software, Activision Blizzard and EA (Electronic Arts). The first one is a video streaming service while the others are extremely popular video game developers. We have no info on Hulu as it is not publicly traded but other three companies have market caps of $6.82 billion (Take Two Interactive Software), $41.12 billion (Activision Blizzard) and $29.82 billion (EA). All of the aforementioned video game developers trade on NASDAQ.
There have been some claims coming from ‘Suva’ that Apple should rush to spend its cash because of the advantage of President Trump’s new tax proposal. That program allows US-based multinational companies to repatriate their revenue outside the country at a tax rate of 10% and the current rate is 35%. Having said that, more than 90% of the Cupertino, California, company’s assets are held outside of the US.
Suva shared a view on that matter by saying ‘Since one of the new administration’s top priorities is to allow U.S. companies to repatriate overseas cash at a lower tax rate, Apple may have a more acute need to put this cash to use.’
If the proposal gets passed and becomes law, and they do decide to transfers all of its assets to the US they will still have a large sum of over $220 billion which is quite enough to buy any of the companies mentioned in Suva’s note.
Apple itself is also traded on Nasdaq and bears the title of the world’s most valuable company with a market cap of $789.53 billion (having closed the Friday trade).