JPMorgan Says Apple Should Go After Netflix, Sonos Or Activision

What should Apple Inc. AAPL do with its cash hoard of nearly $250 billion? According to JPMorgan's Samik Chatterjee, the iPhone maker should put some or most of that cash to use to acquire one of three companies.

What Happened

Apple has enough cash on hand to outright buy Netflix, Inc. NFLX at a premium valuation, CNBC quoted Chatterjee as saying Monday.

Netflix's multiple stands at around $150 billion; factoring in $7 billion of net debt, a 20-percent premium implies Apple could acquire the streaming video company for $189 billion.

Despite overseeing a deal that would in theory use most of Apple's cash, there is "value to acquiring the most successful player in this space," the analyst said. Even if Apple is looking to make a significant push in the streaming video space, it will be the "smaller player" in the market, making it difficult to replicate Netflix's success, he said. 

Apple may also want to consider buying video game maker Activision Blizzard, Inc. ATVI at a time when the gaming market is shifting more rapidly toward mobile, Bloomberg reported. Another option at Apple's disposal is an acquisition of smart speaker maker Sonos Inc SONO, since Apple trails its competitors in the smart home category and Sonos sells a premium product, according to JPMorgan. 

Why It's Important

Apple and Netflix have much in common, as Netflix fits with Apple's preferences of being an "aggregator of content," Chatterjee said, according to CNBC. Netflix's monthly subscription business model would complement Apple's growing Services revenue business, in the analyst's view.

Netflix stock was up 2.72 percent at the time of publication Monday in the wake of JPMorgan's hypothetical note on how Apple should proceed with its cash. Sonos was the clear outperformer among the three and was up more than 7 percent, while Activision was up 1.34 percent. 

Related Links:

Why Netflix Could Be A Top Prospect For Apple

What A Netflix Acquisition By Apple Might Look Like

Photo courtesy of Netflix.