Apple Inc. (NASDAQ:AAPL) is one of the, if not the most profitable company in the world. With profits of over $53.0 billion in 2016 alone and a reported $200.0 billion stuffed into its hefty war chest, the company has a lot of cash with which to throw some weight around.
That makes Apple investments exciting, in that nearly any company could theoretically be in its sights. The speculation and investigation of Apple acquisition targets is equally important to investors, as rumors alone—especially when linked to such a powerhouse like Apple—can send both the acquisition target and Apple stock soaring.
In this piece we’ll take a look at a number of companies that may fall under the long shadow of Apple’s gaze.
But, before we start on potential Apple investments, let’s get situated with where the company stands at present. Since the beginning of 2017, AAPL stock has jumped 24%, and over the past 12 months, the company has experienced 34% growth. Those are great numbers that speak to the health of one of Silicon Valley’s pillar companies.
But there’s more to the story than just the numbers. While AAPL stock has hit all-time highs in 2017, there are some analysts who are skeptical of the rise, and for good reason. Compared to the last time Apple reached these lofty heights for the Apple stock price, the company had far less debt and more profitability. In fact, the share price surge is partly due to a buyback operation by the company itself.
Apple has registered a 16% lower net income and nine percent fewer earnings per share compared to 2015, its last all-time high stock price.
Another issue is that Apple’s last four quarters earned it $45.2 billion in net income, which is quite the departure from the $53.4 billion it earned in the four quarters ending September 2015.
Not to mention that Apple finds itself mired in debt. The company has packed on nearly $75.0 billion in long-term debt since 2013. Worse yet, the company started from nearly zero debt at that time. The growing debt may slow Apple investments in 2017.
With all that in mind, Apple is looking for a winner to continue its stock price rise and prove that the buybacks and debt are irrelevant to its share growth potential.
The company experienced its first dip in revenue year-over-year in more than a decade. While by no means Apple killers, these are some drawbacks for the stock that investors ought to be aware of. Apple is still a very healthy and strong company, but there are chinks in the armor that are worth looking into.
But the greatest event looming on Apple’s horizon is, without a doubt, the release of the Apple “iPhone 8.” The 10th-anniversary model is being billed as revolutionary. There are rumors concerning augmented reality (AR), an improved screen, a buttonless display, wireless charging…the list goes on. There’s hype in abundance for Apple’s next model.
But the competition has never been fiercer. The Samsung (NASDAQ:SSNLF) “Galaxy S8” and “Galaxy S8+” have arrived, and are turning a lot of heads in the tech world. Considered the main competition to the dominant iPhone, the Galaxy S8 is Samsung’s flagship model that is set to challenge the iPhone 8 when it does eventually get released.
Samsung’s first major improvement is that, unlike in the “Galaxy Note 7,” the Galaxy 8 doesn’t explode. Definitely a smart move to cut that from their newest model.
Kidding aside, Samsung is a little bit on the ropes since the Note 7 recall, due to the aforementioned spontaneous combustion feature. Its Galaxy 8 has, however, seemed to have won over techies, which could be a danger to Apple stock moving forward, if the rival phone producer is, in fact able to steal some of the iPhone 8’s thunder. With such intense competition in the smartphone space, savvy Apple investments in 2017 could help the company further diversify its revenue stream and therefore be inoculated against surging Samsung sales.
But, aside from those challenges, Apple is still in a great place as a company. Huge profits, strong products, a well-loved brand, and a strong emphasis on innovation are likely to further propel AAPL stock growth in 2017.
Now let’s get to which companies may help propel that growth as Apple acquisition targets.
Will Apple Buy Disney?
Perhaps the biggest rumor surrounding the company is whether it will acquire, or attempt to acquire, the massive media mogul that is Walt Disney Co (NYSE:DIS). And this makes a lot of sense.
Why? Well, for one thing, Apple is a very diverse and well-situated company with a lot of different plays on the go, but one area where it is lacking is in the media division.
While the empire has focused on hardware and software mainly, it has yet to produce much of its own original content in terms of media. The company has always valued its brand image, and some of the most memorable commercials of all time have come from the Apple marketing department, but it has yet to step into the content arena. And we all know how much Apple loves to create its products with as little external influence as possible. Bringing Disney into the fold would essentially buy Apple a ready-made media empire which it can shape in its own image.
That makes Disney a prime Apple acquisition target and the potential recipient of huge Apple investments in 2017.
Why Apple Should Buy Disney
If Apple wants to continue its expansion and dominance as a major tech empire, eventually the creation and sale of original content will become a likely avenue to pursue to open up new revenue streams. And Disney would be a great company to provide that for Apple.
The company has rights to beloved children’s franchises and the entire “Marvel Cinematic Universe,” two foundational genres that often draw in hordes of viewers. It also owns the rights to the Star Wars franchise.
Take the Beauty and the Beast live-action remake as an example. The movie has grossed well over $700.0 million since its early March release. And last year’s highest-grossing film? Rogue One: A Star Wars Story, another Disney production. (Source: “Box Office: ‘Beauty And The Beast’ Waltzes Past $700M Worldwide,” Forbes, March 28, 2017.)
Not only would Apple acquire the largest movie franchises around, but it would be able to have its own original content produced by the best in the industry.
Disney stock is up over eight percent since the beginning of 2017, and up 14% over the past 12 months. With rumors that Disney will be spinning off “ESPN,” which has been seen as a detriment to DIS stock, the situation could be ripe for an Apple acquisition. With strong revenue growth year-over-year in 2016, Disney is exactly the type of company that would make a great fit as an Apple investment. (Source: “Global revenue of the Walt Disney Company in the fiscal years 2006 to 2016 (in billion U.S. dollars),” Statista, last accessed April 4, 2017.)
For investors, expect stocks to jump if the rumor becomes reality.
Other Companies Apple Should Acquire
|Apple Investment Companies||Ticker|
|Walt Disney Co||NYSE:DIS|
|Activision Blizzard, Inc.||NASDAQ:ATVI|
|Advanced Micro Devices, Inc.||NASDAQ:AMD|
Aside from Disney, what are some other Apple investments that would see payoffs for the tech giant in 2017?
Activision Blizzard, Inc. (NASDAQ:ATVI)
Much like Disney, acquiring Activision Blizzard, Inc. (NASDAQ:ATVI) would provide Apple with a strong content creator, although now in the medium of video games.
Activision Blizzard is a dominant force in personal computer (PC) gaming, with several premier titles that generate huge sales year-over-year, including World of Warcraft, StarCraft, and its newly released Overwatch, coupled with perennial powerhouses like the Call of Duty franchise.
“Apple Macs” have long been known to be inferior to PCs when it comes to gaming, but the acquisition of Activision Blizzard could change all that in an instant, with a renewed focus on content creation in the gaming world.
ATVI stock is currently soaring, up nearly 40% since the beginning of 2017, making it a company on the up-and-up that Apple could very well make use of.
Netflix, Inc. (NASDAQ:NFLX)
Another great company that could provide an instant powerhouse for Apple in content generation, Netflix, Inc. (NASDAQ:NFLX) is the premier streaming site in the world, with over 90 million subscribers worldwide.
With such a strong brand already behind it, alongside the added bonus of being teamed up with Apple, you have what analysts speculate could be one of the major Apple acquisition targets in 2017.
While Netflix is facing—much like Apple—more heated competition against its flagship product (streaming services), it is still poised for more growth and increased revenue despite some upstart challengers.
Netflix stock is up 20% this year.
Advanced Micro Devices, Inc. (NASDAQ:AMD)
A non-content related acquisition, Apple could use the expertise of Advanced Micro Devices, Inc. (NASDAQ:AMD) in chip development to solve a variety of problems.
Apple is currently mired in a legal battle with a fellow chip producer, QUALCOMM, Inc. (NASDAQ:QCOM). The outcome could be a long and protracted conflict, which is why acquiring AMD might be the salve that Apple needs to soothe its wounds in the aftermath.
Apple is famous for its favoring of in-house development of hardware and software, preferring to avoid bringing in outside partners when possible. AMD stock represents a company on the rise with strong chip technology that would allow Apple to bring even more of its manufacturing process under the Apple umbrella.
AMD could also help out in a previously mentioned area that Apple is desperate to expand in: AR.
As outlined above, Apple CEO Tim Cook is a believer in AR tech and, as such, it would only make sense that the company searches out ways to give its devices an edge over other AR competitors. If Cook really does believe that AR is the next paradigm-shifting tech on the horizon, then investing in a chipmaker that could push Apple’s AR development to new heights would not only make sense, but would seem to be one of Apple’s best moves to get ahead of the curve.
AMD was the darling of the stock market last year. The company’s share price is up 24% in 2017 and it skyrocketed over 400% in the past 12 months. It could become one of the great Apple investments in 2017.