Apple Inc. (NASDAQ:AAPL) rumors cause quite a splash on Thursday afternoon after its intentions to purchase major firms were the subject of a report from FBR Capital’s Daniel Ives. The report followed a common thread, establishing that Apple had loads of cash to throw around and asserting that now was finally the time for the company to make a really major acquisition. It’s not worth putting too much thought into, however.
Apple’s apparent quest to buy GoPro Inc (NASDAQ:GPRO) and Tesla Motors Inc (NASDAQ:TSLA) isn’t likely to come to fruition. The simple fact is that nobody knows what kind of firms Apple will acquire, and any who claim forecasting powers should be asked to explain the firm’s Beats acquisition.
Apple doesn’t need GoPro
On Thursday shares in GoPro Inc (NASDAQ:GPRO) spiked after the release of Mr. Ives’ report. It’s not clear if the report was the direct reason for the massive rise in value on Thursday, and it’s much more likely it was not, but many on Wall Street have linked the two ideas.
It’s not clear, however, why Apple would want to splash out a paltry couple of billion on the action camera maker. Mr. Ives says that it’s about drones and VR. Those are areas that GoPro is ahead according to the report, and ones in which Apple is lagging behind. The question is why Apple would try to get its hands on GoPro for technology when the firm’s core business is struggling and competes with that of the iPhone in some ways?
Apple could go plenty of other places in order to get its hands on tech related to drones, and it could find VR tech a whole lot cheaper than the price at GoPro. That’s not to say that Apple is entirely uninterested, however, and the firm is certainly keeping track of all of the major consumer electronics movers.
Shares in GoPro fell sharply on Friday morning’s market, though the stock are still up strongly from their open on Thursday morning. Though rumors that Apple could benefit from buying the firm may have contributed to the price surge, it’s not likely that too many on Wall Street took the idea seriously.
Apple may, at some point, decide to buy GoPro, after all the firm has surprised in the past, but for the time being that just doesn’t seem likely.
Tesla Motors to build the Apple car?
This is a story that simply won’t go away. Tesla Motors Inc (NASDAQ:TSLA). has been linked with all sorts of secret deals at Cupertino, but the vast majority turned out to be pure fantasy.
Ives, in his report, said that Tesla Motors Inc (NASDAQ:TSLA) could be an ideal target for an Apple buyout. Apple is looking, with its Project Titan, at the car industry as its next growth area, and Tesla Motors, the auto-maker with the highest levels of growth industry-wide, would be a perfect opportunity to get in on the ground floor of a transformation.
There’s all sorts of issues with this, however. Firstly Tesla Motors may not want to be bought and a powerful few hold enough shares to make an acquisition deal, no matter how large, stutter. Second Tesla is a $30B firm that would likely come with a hefty premium. Any deal of that size for a firm that burns cash like there’s no tomorrow could truly irritate Apple shareholders.
Thirdly, if Apple wants to get into the car game it has a whole lot of other options. Each of them is more attractive, from a value perspective, than Tesla Motors. Renault SA is valued at about $28B, while the entire Daimler AG, which owns Mercedes and many more brands, is valued at $80B.
The Supercharger network isn’t the kind of obstacle that Apple can’t match. The Gigafactory has only just begun, and an Apple car’s brand power would dwarf that of Tesla Motors. Why then would the firm want to buy Elon Musk out? In part it would be a way to hire a talented directed auto division all at once.
It could cut down the time that Apple needs to get its vision for a car onto the road, but it would be an expensive way to go about it. Add to that the fact that Tesla Motors probably wants to stay independent, and it seems that Tim Cook’s going to be disappointed, at least if his Christmas wish list matches that which Ives authored for him.
Apple wants to keep private
It’s important to recall that Apple’s largest acquisition to date was that of Beats. That firm, which was acquired for $3 billion or so, was private when Apple put in its bid. Apple has acquired very few public companies though that’s not to say it can’t start doing so in 2015. The point of the speculation in the report is, however, more speculation for speculation’s sake. Looking at possible acquisition targets is a way to explore goings-on at Apple Inc. (NASDAQ:AAPL), more than actual targets for the firm.
In particular it addresses the question: Where is Apple’s next leg of growth going to come from? That’s a query that has haunted the firm’s share price in recent months and brought few answers from the likes of Tim Cook.
Speculation about whether Apple will acquire Tesla Motors is, with a dearth of evidence of talks or any other interaction, about as useful in terms of Tesla stock pricing as thinking about whether GoPro is going to buy the firm. Neither firm is going to move Tesla stock in a foreseeable way in the near future, and unless there is some specific information around it’s not an area worth focusing on.
As a way to explore Apple Inc., however the technique may be useful, and that’s likely what Ives was going for in his original treatment of Tim Cook’s shopping list. Looking at Tesla Motors and GoPro as possible targets shows the areas that Apple is exploring right now and the kinds of difficulties they face.
Ives’ report has a fairly clear message. Apple needs to move on and build something radically new now that iPhone sales growth is slowing. Calls echoing that are going to get a lot more common should the firm miss its sales estimates for the fourth quarter of calendar 2015, something that lots of voices on Wall Street are forecasting right now.