Despite a massive sell-off at the start of 2019, Apple (AAPL) managed to end January on a positive note. The stock rose 5.5%, compared to 8.0% and 9.5% rises in the S&P 500 and the NASDAQ Composite last month. In the first quarter of 2019, AAPL’s services business performed well. Revenues from the segment rose 19.1% while the company’s product segment revenues fell 7.2% YoY (year-over-year). Now let’s take a look at the largest US bank, J.P. Morgan’s suggestion to Apple.
J.P. Morgan analyst
According to a CNBC report, J.P. Morgan analyst Samik Chatterjee said in a note to clients that Apple should consider using its huge cash reserve to acquire some well-known companies. Netflix (NFLX), Activision Blizzard (ATVI), and Sonos (SONO) were three potential companies that the analyst though Apple should consider acquiring.
Chatterjee called Netflix “the most successful player” in the video content services segment, and he thinks an Apple acquisition could help Apple gain the top position in the segment. But for this acquisition, Apple might have to pay a handsome premium.
Could Apple acquire these companies?
At the end of the December 2018 quarter, Apple generated an operating cash flow of $26.7 billion, and its net cash balance stood at $130 billion. The company’s cash reserves grew to $245.03 billion, compared to $237.10 billion at the end of the September 2018 quarter.
It makes sense for Apple to seek good investment opportunities and acquire companies that could help it while its iPhone sales are falling. However, Chatterjee doubted the possibility of such a deal between Apple and Netflix, saying “a combination is less likely as Netflix is unlikely to be a seller for a modest premium.”
In January, Apple, Blizzard, Sonos, Netflix (NFLX), Microsoft (MSFT), NVIDIA (NVDA), Alphabet (GOOG), Facebook (FB), Amazon (AMZN), Tencent Holdings (TCEHY), Oracle (ORCL), Tencent Music (TME), Intel (INTC), Advanced Micro Devices (AMD), Baidu (BIDU), and Micron (MU) rose 5.5%, 1.4%, 20.9%, 26.8%, 2.8%, 7.7%, 7.7%, 27.2%, 14.4%, 13.0%, 13.1%, 11.3%, 0.4%, 32.2%, 8.8%, and 20.5%, respectively.