- RBC Capital Markets is seeing "increased discussions" among Wall Street investors on what Apple can do with its overseas cash holdings if tax reform passes.
- The firm believes an Apple acquisition of Disney would be "logical" way to scale its content and services business.
- But the analyst admits the odds are low.
RBC Capital Markets told investors a mega-merger of Apple and Disney, though unlikely, would make sense strategically for the iPhone maker.
"We have seen increased discussions among investors regarding 'How could AAPL gain scale in media/content and what could it do with potential cash repatriation?" analyst Amit Daryanani wrote in a note to clients Thursday.
"We see a confluence of events that make an acquisition of DIS a 'greater than 0 percent' probability event (while odds are low). AAPL's focus on services and its inability (so far) to replicate its music/iTunes strategy into content/media make acquiring DIS logical in our view."
Daryanani cited Apple CEO Tim Cook's comments that "deal size isn't a negating factor" for its future mergers and acquisitions.
In addition, the analyst noted the Republican tax repatriation holiday proposals, where corporations can bring home overseas earnings at a lower tax rate. If this tax reform becomes law, the iPhone maker will have access to its more than $200 billion held abroad for acquisitions, he said.
Daryanani gave six reasons why Apple may buy Disney:
- "Accelerates AAPL's push into services and content."
- "Instantly leapfrogs Netflix, Amazon, and YouTube in content and resets the lead with
- "AAPL has been unable to replicate its music playbook to video."
- "Iconic brand — there are few brands that AAPL could acquire that wouldn't dilute its iconic presence and customer relationships; DIS would clearly strengthen (and not dilute) the brand value."
- "Even using minimal cost synergy, we see the deal being accretive by 15-20 percent."
- "AAPL has been increasingly looking at larger deals and noted that services
RBC Capital reiterated its buy rating and $155 price target for Apple, representing 9 percent upside from Wednesday's close.