Apple Inc. Could Make 2016 the Year of Acquisitions

Apple Inc. (NASDAQ:AAPL)

Apple Inc. (NASDAQ:AAPL) has faced serious headwinds in the last couple of sessions and the stock is a hairbreadth away from closing with losses in 2015. The firm’s stock was down by as much as 1.5% yesterday and erased all the year-to-date gains before it managed to climb back up to close with a 0.77% gain. The strong bearish headwinds that Apple is facing could be traced to a number of factors. One of those is the weak sales forecast for the iPhone in 2016.

Apple Inc. (NASDAQ:AAPL) Store

Another reason for the headwinds is the failure of the Apple Watch to gain traction in the mass market. The fact that Apple has generally lagged other tech stocks in 2015 and the fact that the stock might end 2016 with losses also paints a gloomy picture ahead. Nonetheless, some analysts have opined that Apple might want to turn to acquisitions in order to jumpstart growth in 2016.

Apple might buy its way to growth

It is no longer news that Apple sits on more than $200B in its cash reserves and share buybacks have been a needless waste of money because Apple’s stock is stuck. USA TODAY reports that Daniel Ives, an analyst with FBR Capital thinks that Apple would be better off spending some money on a “Christmas M&A list”.  Some of the firms that Ives tipped for a buyout by the firm include Box, GoPro, Tesla Motors Inc, and Adobe.

Tesla Motors will make a particularly hot target for Apple and the acquisition or merger of Apple and Tesla could create a massive disruption in the tech and auto markets. Tesla’s cars are often painted as “iPhones on wheels” and the firm has built a brand model that is similar to Apple in many aspects.  Tesla has a market cap of $28.95B; hence, Apple’s $200B cash reserve is more than enough to pull off the deal even with a 20% premium.

Apple Inc. (NASDAQ:AAPL) might also want to consider buying Box, (a cloud-based file-sharing service for large firms), and GoPro, (a maker of action cameras). Box and GoPro provides Apple with a unique opportunity to diversify its product base beyond iPhone, iPad, MacBook and Apple Watch. Box might help build a strong foothold in the software-as-a-service space. GoPro provides the firm a chance to enter the fast-growing market for action cameras and action spot contents.

Apple should stop playing it safe

Daniel Ives has mentioned that his report on Apple’s Christmas list is speculative because Apple tends to veer towards buying small under-the-radar startups whose peoples and patents can be absorbed by its’s core products. Blau, an analyst at Gartner says “Over the last two-and-a-half years, it’s purchased at least 25 companies, many of them small start-ups that “build on (Apple’s) core technology”.

Yet, Apple Inc. (NASDAQ:AAPL) has broken its rules once when it bought Beats. Chris Sullivan, CEO of Gazelle says “Apple did it with Beats (for music), and it can do it again.”  It remains to be seen if the firm will take the advice to start writing the checks; yet, it is important that the firm break out new product categories if it wants to maintain its lead in the tech space.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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