7 Companies Apple Could Buy in 2019
Apple is hungry for content partnerships.
Apple (ticker: AAPL) stock is down 14% in the past six months, but Apple hopes to turn things around with its own standalone streaming video content service. Wedbush analyst Daniel Ives says Apple investors can expect more than just content partnerships. Apple has roughly $130 billion in cash on its balance sheet as of the end of 2018, but the company said its goal is to eventually be cash neutral. Ives says it's not a matter of if but when Apple makes a major streaming content acquisition. Here are Apple's seven most likely buyout targets, according to Wedbush.
A24 Studio
Ives says Apple's most likely near-term buyout candidate is independent New York entertainment company A24. A24 specializes in film and TV production and film distribution, and its movie "Moonlight" won the 2017 Academy Award for Best Picture. Apple already announced a content deal with A24 in November to produce multiple original movies. A24 is nowhere near the size/cost of larger, more established studios, it has a strong track record of high-quality content that would fit perfectly with Apple's brand and Apple will get a chance to see how the company operates, thanks to the new contract.
Lionsgate Entertainment Corp (LGF.A, LGF.B)
After A24, Ives says the next most likely buyout target for Apple is publicly traded Lionsgate. CEO Jon Feltheimer has reportedly been open to the idea of a sale. In recent years, hit movie franchises "The Hunger Games" and "John Wick" have been cash cows for Lionsgate, along with TV series like "Orange is the New Black." Apple could also use content from Lionsgate subsidiary Starz. With a market cap of just $3.2 billion, Apple would have no problem affording a Lionsgate buyout, even at a significant premium to market price.
The next most likely Apple buyout candidate is Viacom and/or sister company CBS Corp. (CBS). Viacom and CBS have been discussing a merger for several years and ousted former CBS CEO Les Moonves was reportedly the major source of opposition to the deal. CBS and Viacom are both reportedly joining Apple in launching their own stand-alone streaming services early this year, but combining resources could make for a much more impactful product. A combined CBS/Viacom would have a market cap of more than $30 billion, making it a financial gamble for Apple.
Sony Pictures
Sony Pictures is the American motion picture and TV production subsidiary of Japanese multinational conglomerate Sony Corp. (SNE). Ives says Sony Pictures is on the short list for Apple acquisitions. In December, Variety predicted Apple would acquire Sony Pictures sometime in 2019. The Sony Pictures library includes hit movie franchises "Men In Black" and "Spider-Man," as well as smash hit TV series like "Breaking Bad." ReCode estimated Sony Pictures' valuation at around $30 billion in 2017, but it is likely even higher today given the current content merger climate.
MGM Studios
Privately held MGM Studios is home to classic film franchises such as "James Bond" and "Rocky." Its TV library includes Hulu's "The Handmaid's Tale," A&E's "Vikings" and FX's "Fargo." In addition, MGM owns a handful of U.S. TV channels, including MGM HD. MGM is difficult to value given that it's a private company, but Reuters estimated its value at more than $5 billion last year when the company was reportedly exploring a sale. Ives said an MGM Studios buyout is a "medium probability" deal for Apple.
Netflix (NFLX)
For years, Netflix has been a rumored buyout target for Apple, and each year the price tag for a deal keeps getting higher. On the surface, a deal makes perfect sense. Apple, Walt Disney Co. (DIS), CBS and other companies launching streaming services are all chasing Netflix. Instead, Apple could just buy Netflix and be the global streaming leader overnight. Unfortunately, Ives says Netflix is one of the least likely of his seven buyout candidates. Its $158 billion market cap plus the premium Netflix shareholders would demand would be difficult for any company, including Apple, to digest.
Take-Two Interactive Software (TTWO)
Of all the potential buyout candidates for Apple on this list, video game publisher Take-Two is the most outside-the-box pick. However, it could also go a long way in differentiating Apple's streaming service. Ives says a gaming publisher would be a "wild card" deal for Apple and its content could be included in the TV and movie platform or rolled out as a separate service. With a market cap of just $9.5 billion for Take-Two, Apple could theoretically buy both Take-Two and A24 in 2019 for less than the individual costs of Netflix, Sony Studios or Viacom.
Companies that Apple could buy in 2019.
-- A24 Studio
-- Lionsgate Entertainment Corp (LGF.A, LGF.B)
-- Sony Pictures
-- MGM Studios
-- Netflix (NFLX)
-- Take-Two Interactive Software (TTWO)
