The impact of the corona virus pandemic has hit the media giant, Disney. Its stock has come under pressure as theme parks close and high-profile movies have been delayed to release. Rosenblatt Securities financial analyst Bernie McTernan has stated that this opens an opportunity for Apple to buy Disney.
The idea of Apple and Disney combining is not new. In 2006 when Disney acquired Pixar, Apple and Pixar founder, Steve Jobs, was Disney’s largest investor and member of the Board. Disney CEO Robert Iger wrote in his autobiography last fall that a merger between the two companies might have happened if Jobs hadn’t passed away in 2011.
Robert Iger wrote:
I believe that if Steve were still alive, we would have combined our companies, or at least discussed the possibility very seriously.
On Friday last week, financial analyst Bernie McTernan brought back the idea by pointing out that the sharp slide in Disney’s shares. Its stock officially dropped below the $100 mark last week. Disney had to close most of its theme parks, including in California and Florida. The media giant has also lost $85 billion, which is around one third of its market cap. Analyst McTernan concluded in his research report that it could cause an acquisition of great proportions.
Bernie McTernan explained:
We believe those with long-time horizons, like mega-cap companies with large cash balances and whose equity outperformed Disney over the last three weeks, like Apple, could take advantage of the volatility.
Disney’s market capitalization has fallen to $168 billion. That suggest that Apple with its $98 billion in net cash could buy the company at the fire-sale price. McTernan thinks that Apple can take advantage of the market volatility and finds a combination between Apple iOS platform and the Disney ecosystem of content, merchandise, and parks appealing.
In his research note, McTernan gives a few reasons why Apple should buy Disney:
- Market volatility has made Disney an easy target wit its shares being down more substantially than Apple stock.
- Disney is currently in a CEO transition.
- Apple TV is off to a bad start and Disney + can solve the content problem.
- “Ultimately, we believe Disney will benefit from the Disney+ customer relationship driving more sales of parks and movie tickets, and streaming service subscriptions. Apple generates similar benefits from their iOS ecosystem, and we believe there could be synergies from combining the two.”
Apple has not expressed any sings in support of McTernan’s speculation. In reality the company seems to usually make smaller transactions and repurchase its own shares.