There's a Strong Chance That Apple Will Buy Netflix, Citi Analysts Say

Muriel Hammond
January 3, 2018

But a pair of analysts from financial giant Citi think there's a good chance Netflix itself may soon become part of an acquisition that eclipses the Disney/Fox deal: they believe there's a 40 percent likelihood that Apple will acquire the streaming service.

It's not exactly a secret that Apple has a lot of cash laying around, and thanks to the GOP's new tax plan, we may see it put some of that money to use. It fluctuates, since it's pegged to Netflix's stock price, but the company's market value pushed past $80 billion in 2017, and is expected to scrape the $100 billion mark if its stock continues to rise. The cut in corporate taxes and one-time allowance for companies to repatriate cash stored overseas without a major tax hit will give Apple, which has about $252 billion in cash at mostly foreign jurisdictions, a way to bring money back to the U.S. and make acquisitions. Meanwhile, Apple was up by 1.28 percent on Tuesday. Instead of the previous 35 percent it would have had to pay to bring it back to the US, Apple would now pay less than half that amount, leaving it with an estimated $39 billion tax bill.

The acquisition detailed in the note to investors is just speculation, but Apple could move towards a Netflix buy in an effort to boost its streaming department.

Apple has more free cash than it knows what to do with, and buying Netflix would be a way for it to offload more than $250 billion in newly-repatriated earnings it's been holding overseas. Amazon has its own service in Prime Video, while Netflix and Hulu still dominate many discussions about which streaming services are the best. "With over 90 per cent of its cash sitting overseas, a one-time 10 per cent repatriation tax would give Apple $220 billion for M&A or buybacks". Apple also sells and offers rentals to consumers. That money helped Apple lock down an order for a reboot of the Steven Spielberg executive-produced Amazing Stories, as well as a coveted scripted drama about morning TV shows set to star Jennifer Aniston and Reese Witherspoon. If Apple were to do that, it would certainly be one of the largest deals we'll see in 2018 as the streaming service now has a market cap of $87 billion. "Netflix has won", analyst Tim Nollen said in the note. The boost in original content will result in a $2 billion saving in licensing fees, the analyst said.

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