Could Apple swallow Netflix in one $80 billion bite?

Citi Apple acquisition targets

Citi Research

With Donald Trump's aim to cut corporate taxes, alongside a one-time chance for companies to bring cash back to the U.S. from overseas without accruing a large tax bill, Apple will have a much bigger budget to buy new companies.

Apple famously has 90 percent of its cash, or around $252.3 billion, held outside of the US. This was based on his analysis of Apple's and Netflix's revenue, gross margin, operating expense ratio, other income and interest expense, tax rate and share count three years out from their last fiscal year.

The spike in stock price came after Business Insider revealed on Monday a December note by Citi analysts in which they said that the likelihood of Apple buying Netflix has increased under President Donald Trump's new tax cut. Forbes reporter Karl Kaufman argues that there is good reason to doubt this analyst prediction, writing, "Apple has already committed $1 billion towards creating new shows and their largest acquisition was buying Beats for $3 billion in 2014". 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.

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. By purchasing Netflix, Apple could jump start its streaming efforts in a really major way. As such, tax reform may allow Apple to put this cash to use. Apple also sells and offers rentals to consumers.

Apple has much of its stockpile in foreign regions, which it was previously unable to transfer to the US. The company is also working on its first scripted series with Jennifer Aniston and Reese Witherspoon.

The streaming giant has heavily impacted and diversified the television field, and Apple may be looking to get its hands in that pot - recently setting a $1 billion budget to produce its own original content. Analysts claim that Apple, in possession of a surplus of overseas cash, will approach Netflix for a deal.

The other reason the analysts at Citi think Apple could target Netflix? The boost in original content will result in a $2 billion saving in licensing fees, the analyst said.

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