Apple might have plans to establish a foothold in the online video streaming market. Citi analysts suggest it has set its eyes on Netflix.
U.S. President Donald Trump recently proposed a corporate tax cut to encourage companies to spend their earnings locally. Reports confirmed that it was recently passed along with some added benefits.
Experts Share More
The Cupertino firm's possible acquisition plans related to the video streaming service was noted by both Citi analysts Asiya Merchant and Jim Suva. It appears that the basis for their projection is how most corporations have large amounts of cash sitting outside the United States.
The approved tax cuts together with a one-time allowance for repatriation of cash from overseas minus the tax liabilities will definitely lead to an increased spending budget for companies like Apple.
Forecast Looking Good
The financial experts from Citi worked their numbers and came up with the 40 percent likelihood that Apple will acquire Netflix. The company's cash reserves are reportedly estimated to amount more than $252 billion.
Given that 90 percent of Apple's cash reserves are currently stored in foreign institutions, Trump's tax adjustments and repatriation amnesty will make it difficult for corporations miss out on this opportunity.
Company Spending History
The possibility that Netflix will be purchased by Apple is not really far-fetched based on its past acquisitions. The firm paid $400 million for Shazam, a music discovery app. What followed was its $3 billion purchase of Beats Audio, which is currently the most expensive transaction in its books.
However, if the speculated deal with Netflix materializes in the future, it will most likely be significantly higher than the Beats deal.
A closer look at the capitalization value for Netflix puts it at a little over $80 billion. Experts place a 30 percent premium on that, so, it adds up to a total of $104 billion in order for Apple to acquire the streaming business. Looking at the latter company's total assets, it is capable of matching the asking price.
Other Possible Ventures
The sources also entertained the possibility that Apple and Disney might strike a deal, which they gave a 20 to 30 percent possibility. However, that was before the entertainment company closed a deal with Fox. If the deal with Disney pushes through, its stock would go up by 20 percent, which, compared to the 6 percent increase with Netflix, is obviously a better option for its stockholders.
Additionally, there is a 10 percent possibility that Apple might go for gaming companies such as Activision, Take-Two, or Electronic Arts.