Analysts Lay Odds At 40% That Apple Buys Netflix In 2018
Many Netflix fans aren’t sure if a purchase of the streaming giant by Apple would be a good thing or not. Regardless of these mixed emotions, there is a high likelihood that Apple will buy Netflix in 2018 according to Citi analysts. These analysts put the probability of a Netflix purchase by Apple at 40 percent, with the the purchase being made possible thanks to President Trump's tax cuts.
Citi reckons that Apple could repatriate about $220 billion in cash it has sitting around outside the U.S. in 2018, and that the company would only need spend about a third of that cash to gobble up Netflix. Apple is sitting on a massive $252 billion in cash with much of that loot in foreign countries that it was unable to bring to the U.S. without a massive tax hit.
The research note sent out to investors looks at a bunch of potential purchases Apple could make with its massive cash pile, and Netflix is listed as the most likely. This note was penned before Disney bought Fox's studio and TV assets, but before that the likely hood of Apple buying Disney was in the 20 to 30% range.
The thought is that Apple has long wanted a successful TV and movie offering. Netflix most certainly has that and while Apple has tried to make its own content for iTunes, it hasn't been very successful so far. Apple's very deep pockets should also mean that it can afford to foot the bill for more awesome Netflix shows like "Stranger Things".
"The firm has too much cash – nearly $250 billion – growing at $50 billion a year. This is a good problem to have," Citi analysts Jim Suva and Asiya Merchant told clients. "Historically, Apple has avoided repatriating cash to the US to avoid high taxation. As such, tax reform may allow Apple to put this cash to use. With over 90% of its cash sitting overseas, a one-time 10% repatriation tax would give Apple $220 billion for M&A or buybacks."