Apple has plenty of cash to make big acquisitions. And J.P. Morgan believes it should start with Netflix.
In a note to investors on Monday, J.P. Morgan analyst Samik Chatterjee said that “Netflix is the best strategic fit” for Apple to acquire, according to CNBC, which obtained a copy of the note. The analyst added that Apple should acquire a company in the entertainment market and buying a company smaller than Netflix to try and compete against the streaming market leader would be a bad idea.
“There is value to acquiring the most successful player in this space, which is hard to replicate with a smaller player in this market,” Chatterjee wrote.
The problem, however, is that Netflix won’t come cheap. Chatterjee said that Apple might be forced to pay a 20% premium to acquire Netflix, placing its purchase price at $189 billion.
Luckily for Apple (AAPL), that’s a bill it could pay—with cash. The company has nearly $250 billion in cash on hand and could technically write a check for Netflix (NFLX). But the company has had boatloads of cash for years and has been loath to make big acquisitions. Instead, Apple has been content to buy smaller companies for feature upgrades in software.
However, with a slumping iPhone business and a Services division, which includes streaming content and apps, soaring, some industry watchers have questioned whether Apple should invest even more heavily in content. Buying Netflix would see it do just that.
In addition to acquiring Netflix, Chatterjee told investors that he believes gaming company Activision Blizzard or home speaker company Sonos could also be good buys for Apple. Both of those companies would likely sell for considerably less.
