Apple Buys Netflix For $110 Billion In 2018 – Prediction #2

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There were over 1 billion active iOS devices around the world as of January 2016, according to Business Insider.  It seems Apple has the perfect user base to go out and create a streaming media platform. It has been reported by Bloomberg that Apple plans to spend $1 billion and officially enter the stream media content race.  It takes us to prediction number #2 for 2018; Apple Buys Netflix For $110 Billion.

Giant Deal

It seems like a crazy prediction,  but there are only a few companies that have the cash to do such a transaction. With about $250 billion parked overseas that could make its way back to the US in 2018 and what better way to use some of it, but to add a new leg of growth by making a significant acquisition.

The deal would come at around $110 billion, a 35 percent premium to Netflix’s $80 billion market cap.

Apple Reliant iPhone

With nearly 62 percent of its total revenue of $229 billion in 2017 coming from the iPhone, Apple is reliant on continually having to push the envelope to keep iPhone sales up and growing. The addition of a media platform like Netflix could instantly add a spark and giving Apple stock’s a jump start.

Apple has consistently traded at below market earnings multiple, partially because of the reliance the company has on iPhone’s success.

AAPL PE Ratio (TTM) data by YCharts

Scale and Content

Netflix would bring it’s 100 million global subscribers and a massive content library, helping Apple achieve the two most significant hurdles in launching a media empire, scale, and content. Netflix has done the heavy lifting in creating the platform and the content. Apple is one of the few companies that could foot the giant $8 billion content creation budget Netflix has put in place.

The iOS Ecosystem

Apple would then be able to come out with new ways to offer different subscription models to iOS users by either bundling the streaming service into an iOS subscription plan, including music, or perhaps an on-demand one time purchase of a movie or series through the App Store or iTunes.

It could help to incentive consumers to want to continue to buy the iOS ecosystem and then continue upgrading to the newest Apple iPhone or iPads.  The form factor continues to get smaller and with iPhone and iPad screen as good as TV’s the viewing experience today continues to become more personalized, with multiple people watching multiple programs, on multiple screens, all while sitting in the same room.

It could be a match made in heaven.

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10 Predictions For 2018:

10. Tesla’s Stock Price Could Nearly Double In 2018

9. US Real GDP Will Grow at 4% or More In 2018 – 10 Predictions

8. Why The FANG’s Will Lead Stocks Higher In 2018

7. Oil will rise to roughly $75 per barrel in 2018, a rise of just over 30 percent.

6. Inflation will increase to 3 percent in 2018 on a year-over-year basis on the Consumer Price Index.

5. 10-Year Yields rise to 3 percent.

4. Biotech Stocks Will Be Best Performing Sector In 2018

3. Verizon Buys CBS and Viacom In 2018

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The purpose of the 10 predictions is for fun and to think about the year to come. It helps to organize thoughts and think about potential themes and trends that could develop. See our 10 predictions for 2017 and judge for yourself how we did. 

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Photo Credit Via Flickr

Michael Kramer and the clients of Mott Capital own shares of $NFLX

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.

© 2017 Mott Capital Management, LLC.  Use, publication or reproduction in any media prohibited without the permission of the copyright holder.

Tags: #apple #netflix #predictions2018

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