RBC Raises Price Target on Apple Shortly After Dreaming About Benefits of a Merger With Disney

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RBC Capital Markets raised its AAPL price target to $157 today, up from $155, as it believes iPhone sales were stable to modestly better than expected in Apple's second quarter, which ended on March 31.


The investment bank's lead Apple analyst Amit Daryanani said the company's iPhone mix continues to remain positive, with "more" Plus-sized models sold in the quarter than it previously forecasted. iPhone 7 Plus models carry a $120 premium over iPhone 7 models, contributing to a higher average selling price.

RBC now estimates Apple will report quarterly revenue of $53.5 billion, matching the high end of the company's guidance. Apple is scheduled to report its second quarter earnings results on May 2 at 1:30 p.m. Pacific Time. MacRumors.com will provide live coverage of Apple's conference call at 2:00 p.m. Pacific Time.

The bank said it remains positive about AAPL based on so-called "iPhone 8" refresh cycle tailwinds, benefits from a possible capital allocation increase, the acceleration of its growing Services category, and potential upside from U.S. Donald Trump's political agenda in relation to taxes and cash repatriation.

Apple's stock price has been rising steadily since November, as rumors suggest the company will launch its first iPhone with an OLED display and slim bezels, potentially mirroring the design of Samsung's new Galaxy S8. Many analysts have maintained a "buy" or equivalent rating on AAPL since March or earlier.

Last week, RBC Capital Markets generated headlines when it outlined the potential benefits of a completely speculative Disney acquisition.


In a lengthy research note, the bank said such a deal would create a "tech and media juggernaut like no other" and instantly expand Apple's services, content, and media portfolio. Assets such as ABC and ESPN, for example, could lay the foundation for Apple's long rumored but elusive streaming TV service.

An excerpt from Daryanani's research note obtained by MacRumors:
Together, Apple and Disney would instantly have access to global distribution via Apple's installed base and the global iTunes store, and a massive library of content and studio capacity via Disney to make future movies and shows. A digital content service could be put together in relatively short order. Apple has the advantage of integrating its price to consumers with its hardware. For example, buy a new iPhone and receive a 12-month subscription to the streaming service for free.
Daryanani said the so-called "mega deal" would diversify Apple away from hardware and help the iPhone maker fulfill its goal of doubling its Services category by 2020. He also thinks it would be an appropriate use of Apple's massive cash hoard, should the U.S. ever offer a cash repatriation holiday.
A prerequisite to Apple-Disney is a regulatory environment that would allow Apple to use its huge amount of cash assets for a domestic acquisition. If a cash repatriation tax holiday results in a 9% tax on offshore cash brought to the United States, we estimate that Apple would effectively have access to cash of $223 billion. After adjusting for operational requirements, Apple should have $200 billion cash available for discretionary uses.
Daryanani said there is a "greater than 0%" chance that Apple acquires Disney, but he admitted that the odds are low at this point.

Jim Cramer, host of CNBC's "Mad Money" show, believes the Apple-Disney speculation was more about influencing the stock market than anything else.
"The only thing that's really accomplished by this kind of speculation? The short-sellers will be afraid to bet against Disney's stock because of newfound fears of a takeover lurking. It really does put a bid underneath, simply because it was just too juicy to ignore," Cramer concluded.
AAPL closed at $141.83 on Monday. The Walt Disney Company closed at $113.78.

Note: Due to the political nature of the discussion regarding this topic, the discussion thread is located in our Politics, Religion, Social Issues forum. All forum members and site visitors are welcome to read and follow the thread, but posting is limited to forum members with at least 100 posts.

Article Link: RBC Raises Price Target on Apple Shortly After Dreaming About Benefits of a Merger With Disney
 

currocj

macrumors regular
Jul 8, 2008
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PRSI forum? How does this meet that requirement? Does the name Trump auto-trigger said restriction?

Sounds like simple business speculation to me
 
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infinitejest

macrumors 6502
May 1, 2016
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That would be disastrous for both companies...
I think quite the opposite.
Content is one thing Apple still lacks. The more I think about the acquisition, the more it makes sense to me.
Not sure, if it's ever gonna happen, but I hope so. An acquition would have enormous potential for both sides.
 
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IJ Reilly

macrumors P6
Jul 16, 2002
17,889
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The current market cap of DIS is $180B and companies are rarely acquired without a significant premium paid over current market value, so what is being talked about here would soak up virtually every dollar Apple has salted away both in the U.S. and abroad. For some reason this wasn't seen to be important enough to mention, but it is the single most important consideration. Even if some theory can be spun to support the idea that Apple would get something out of a merger, the second important question is why Disney would be interested in one.
 

alexgowers

macrumors 65816
Jun 3, 2012
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I don't understand the benefits of a merger. Would it not be better to develop content slowly from the ground up? Shortcuts rarely work out in life and this seems like a big one. Surely a Disney merger would prevent access to content from rivals as Apple would no longer be able to stay neutral. It would probably make the iTunes Store implode.
 
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thekev

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Aug 5, 2010
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I think quite the opposite.
Content is one thing Apple still lacks. The more I think about the acquisition, the more it makes sense to me.
Not sure, if it's ever gonna happen, but I hope so. An acquition would have enormous potential for both sides.
I can't think of a single case where consolidation of already gigantic companies was an improvement.
 

pacalis

macrumors 6502a
Oct 5, 2011
616
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Acquisition of gigantic companies works if the companies are in the same business lines with similar cultures and strategies. If they are different business lines, it is a disaster.

Imagine, Jony Ive redesigns all of Disney's theme parks.

This idea is soooooo stupid.
 
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thekev

macrumors 604
Aug 5, 2010
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Do some research then.
Hmm..you were the one that suggested this nonsense. Generally the shareholders don't do well in large acquisitions. I'll give you a classic example.

http://www.economist.com/node/1035824

These things are typically a disaster, even if the merger itself is actually approved. That one was particularly bad, but Apple has done far better by picking up small companies that can be integrated without an excessive quantity of layoffs and undervalued IP.
 

ApfelKuchen

macrumors 68040
Aug 28, 2012
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Disney fans still ask, "What would Walt do?" Apple fans ask, "What would Steve do?" I don't want to think what would happen if you put them all together on the same forum!

Meanwhile...
Steve is ousted from Apple
Steve founds NeXT and buys Pixar
Apple buys NeXT and brings Steve back into the fold
Disney buys Pixar and puts Steve on its board of directors
Apple buys Disney? Didn't Guy Kawasaki predict that in 1994?

And what about Laurene Powell Jobs (controls about 7.5% of Disney and 0.7% of Apple)?
 
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mrcobra92

macrumors 6502
Oct 20, 2014
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Hmmmm, not sure how I feel about this idea. I'm a HUGE Disney parks fan (I frequent many Disneyland forums much like Macrumors but for Disney parks news/rumors) and could see some benifit from some more cash flow to the parks division. DL desperately needs a 3rd gate and WDW needs a complete overhaul of Epcot which could be cool with Jony Ives visions. Still don't know what to think overall though.

This is what the Disney parks fans think of the idea.

https://discuss.micechat.com/forum/...ussion/disneyland-resort/8504206-apple-disney
 

infinitejest

macrumors 6502
May 1, 2016
450
599
Orange County, CA
Hmm..you were the one that suggested this nonsense. Generally the shareholders don't do well in large acquisitions. I'll give you a classic example.

http://www.economist.com/node/1035824

These things are typically a disaster, even if the merger itself is actually approved. That one was particularly bad, but Apple has done far better by picking up small companies that can be integrated without an excessive quantity of layoffs and undervalued IP.
Before you call it nonsense, you should actually start giving specific reasons why it wouldn't be an opportunity for Apple and Disney, instead of using examples from the past.
Also, your example shows a technology company acquiring a technology company - whole different scenario.
Apple could benefit from Disney's content and Disney could benefit from Apple's distribution (and devices).

So far, your only point why it wouldn't work is that it hasn't worked for some other companies before. That's what I call nonsense.
 
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