Apple investors are likely looking for the company to use its massive cashpile to make acquisitions, and names like Netflix, Activision Blizzard, and Sonos are among the companies that JPMorgan sees as strong strategic fits.
Shares of Apple have lost more than 25% from an October record, dropping on concerns over the demand prospects for its key iPhone product line.
In its most recent quarterly report, the company posted its first holiday-quarter sales decline since 2001, a drop that was almost entirely due to lower smartphone sales.
Given this environment, and considering that Apple has about $130bn (€113.4bn) in net cash along with an average of $45bn in cashflow generated every year after dividends, investors are likely hoping that Apple “uses its balance sheet strength to insulate the business against often-seen disruptions in the technology landscape”, analyst Samik Chatterjee wrote.
JPMorgan has an overweight rating on Apple stock.
Chatterjee said the prospect of such deals was speculative and theoretical.
It would also be atypical for Apple, given it has historically not been an aggressive buyer of other companies.
Apple has only twice bought publicly-traded companies.
Furthermore, most of Apple’s acquisitions have been on the smaller side.
While it was involved in an $18bn purchase of Toshiba Memory,- along with other buyers, one of its largest deals ever was a $3bn acquisition of Beats Electronics, in 2014.
In JPMorgan’s view, video gaming, video content and smart home speakers are among the industries with “the most strategic value”, for Apple, “providing potential growth opportunities to leverage services over a wider installed base”.
Netflix was deemed “the best strategic fit” for Apple in the content category, “although we appreciate a combination is less likely as Netflix is unlikely to be a seller for a modest premium”.
The video-streaming company has a market capitalisation of $148.4bn, which would make it Apple’s largest acquisition by far, even without a premium.
Apple is “currently lagging competitors in the smart home category,” JPMorgan wrote.
Sonos, in contrast, has a “differentiated position as a premium home speaker system relative to Amazon Alexa and Google Home”, the bank said.