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Apple Buyout goals can include Netflix and Sonos, says JPMorgan



(Bloomberg) – Apple Inc. Investors probably look to the company to use its huge cash table to make acquisitions, and names like Netflix Inc., Activision Blizzard Inc. and Sonos Inc. are among the companies that JPMorgan sees as strong strategic fit.

Shares in Apple have lost nearly 30 percent from an October record and release concerns over demand prospects for their main iPhone product line. In its latest quarterly report, the company has reduced its first decline in the quarter since 2001, a decline that was almost entirely due to lower smartphone sales. The stock rose 1 percent in early trading on Monday, heading for its fourth straight daily gain.

Given this environment, and given that Apple has about $ 130 billion in net cash – along with an average of $ 45 billion in cash flow generated each year after dividends – investors are likely to Apple "use its balance strength to isolate business against often seen disruptions in technology landscape, "analyst Samik Chatterjee wrote. JPMorgan has an obesity class on the Apple stock along with a price target of $ 228.

Chatterjee noted that the prospectus for such deals was speculative and theoretical. Apple did not immediately return a request for a comment, nor did Netflix, Activision or Sonos.

In JPMorgan's opinion, video games, video content, and smart home speakers are among the "most strategic value" industries for Apple, "providing potential growth opportunities to leverage services across a broader installed base."

Netflix was considered "the best strategic fit" for Apple in the content category, "although we appreciate a combination is less likely as Netflix is ​​unlikely to be a seller for a modest prize." Video streaming giant has one market value of $ 148.4 billion.

Video content "influences rapid growth in content content on mobile", and Netflix has "an established platform to accelerate Apple's nascent investment in original content," wrote Chatterjee to clients. Netflix shares increased by 1.3 per cent on Monday.

The speaker category has a "focus on high customer engagement" and it provides "synergies in running Apple Music services."

Apple is "currently striking competitors in the smart home category," wrote JPMorgan, referring to the company's HomePod product line. Sonos, on the other hand, has a "differentiated position as a premium home speaker system from Amazon Alexa and Google Home," along with "strong customer loyalty and [a] strong international presence."

Sonos had a market coverage of $ 1.2 billion, from Friday's close. The share rose 6 percent on Monday, the seventh straight daily gain – the longest stretch in its history.

For Apple, a video game acquisition would offer "influence to an industry that is rapidly moving to mobile", while "hardware capabilities for high-end gaming potentially [support] are a replacement cycle."

Among targets mentioned in press releases , JPMorgan wrote, "we find Activision Blizzard to be the best strategic fit" for Apple. Stocks in Activision rose 0.7 percent. The company had a market value of $ 35.1 billion to Friday.

(Updating stock quotes to the market open, adds Sonos stock context in tenth paragraph.)

To contact the reporter on this story: Ryan Vlastelica in New York on rvlastelica1 @ bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm, Courtney Dentch

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