Could Apple Look to Acquire Disney Amid Stock Drop?

"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" as the coronavirus has hit Hollywood stocks.

With stock markets battered by the coronavirus, and shares of entertainment giants hit hard, some on Wall Street have started wondering if cash-rich technology powerhouses could consider takeover offers for Hollywood companies.

Rosenblatt Securities analyst Bernie McTernan in a Friday research report, for example, suggested that Apple, led by CEO Tim Cook, could consider acquiring the Walt Disney Co., led by executive chairman Bob Iger and new CEO Bob Chapek, after its stock dropped below the $100 mark last week.

"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," he wrote, noting that Disney's market capitalization was approximately $165 billion, while Apple has about $107 billion in cash and securities. "The upside from acquiring Disney would be securing their content/streaming strategy and potential synergies from adding the emerging Disney ecosystem to the iOS platform."

Apple didn't respond to a request for comment.

McTernan, who highlighted that "over the last three weeks Disney has lost about $85 billion or roughly one third of its market cap," also argued that, among other benefits, streaming service Disney+ could help boost Apple's TV+ streaming service. "Disney+ could solve Apple's content problem as we believe AppleTV+ is off to a relatively slow start," he said. Disney earlier this year said it had signed up 26.5 million subscribers to Disney+ by the end of 2019 and 28.6 million as of Feb. 3.

Apple's stock on Friday jumped 12 percent to $277.97 amid a market rebound, while Disney shares rose 11.7 percent to $102.52.