Apple Buying Netflix Speculation Heightens After GBH Says Trump Tax Cuts Make It Possible

GBH analysts believe Apple will repatriate about $200 billion of overseas cash this year under President Donald Trump’s new tax cut. The move would allow Apple to purchase bigger companies, like Netflix, the analysts said in the note seen by 9to5Mac.

Apple currently has a total of $252 billion in cash abroad. The company had been unable to bring back the money because of high tax fees. However, under Trump’s tax cut, Apple will able to repatriate cash without a major tax fee.

The analysts predicted three ways Apple could decide to spend the $200 billion.

“With Apple & Cook set to repatriate roughly $200 billion of cash based on our estimates we believe accelerated buybacks, another dividend hike, and potentially larger M&A will be the trifecta of benefits shareholders could expect to see in 2018,” GBH said.

GBH’s prediction comes after a Citi analyst said last month in a note that there was a 40 percent likelihood Apple could buy Netflix if it repatriates its overseas cash.

The Citi analysts said in the note revealed this week by Business Insider:

"The firm has too much cash – nearly $250 billion – growing at $50 billion a year. This is a good problem to have [...] Historically, Apple has avoided repatriating cash to the US to avoid high taxation. As such, tax reform may allow Apple to put this cash to use. With over 90% of its cash sitting overseas, a one-time 10% repatriation tax would give Apple $220 billion for M&A or buybacks."

GBH also looked into a possible Netflix buy with the overseas cash.

“The burning question on the Street’s mind is does Cook make a big bet with this infusion of cash and do a larger deal (e.g. Netflix) to catalyze and jump start its streaming video/content business,” the firm said in the note.

GBH pointed out that Apple usually doesn’t do large acquisitions. However, Analysts believe the Cupertino company could look intobigger companies to better compete against popular streaming services. Apple has bumped its efforts in streaming lately. The company released exclusive documentaries and original series on Apple Music in 2017. Apple also sells and offers rentals to consumers of movies and TV shows. The iPhone company is also working on its first scripted series with Jennifer Aniston and Reese Witherspoon. However, Netflix, Hulu and Amazon Prime Video are more popular among consumers.

“To this point, while it’s likely Apple keeps its M&A deals under $2 billion in size, we strongly believe it is a ripe time for Cupertino to look ahead and make a bigger bet on a new growth area such as streaming video as with the ‘content arms race’ well underway between Netflix (spending $8 billion this year), Disney (Fox deal), Amazon, and a host of others such as HBO and Facebook aggressively spending on content, now is the right time for Apple to make an aggressive move in our opinion on this front,” GBH said.

While rumors about Apple buying Netflix continue, some experts believe the acquisition will not happen. Meanwhile, a source familiar with the matter also told Fast Company that Apple will only repatriate half of its overseas money in 2018.