Analyst: Disney's Stock Drop Could Make It An Apple Acquisition Target

With Disney’s revenue, and stock performance, facing major hits as the coronavirus devastates its short-term sports advertising and cruise ship businesses, better-positioned companies, like Apple, may begin looking to acquire the company.

Or so thinks Rosenblatt analyst Bernie McTernan, who made the prediction on Friday, after Thursday’s sell-off resulted in Disney’s stock dropping 13%, to under $100.

"We believe those with long time horizons, like megacap companies with large cash balances and whose equity outperformed Disney over the last three weeks, like Apple, could take advantage of the volatility,” McTernan wrote in a research report.

Among other potential benefits, acquiring Disney could help Apple bolster its Apple+ streaming launch, he argues.

"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," he wrote. "Disney+ could solve Apple's content problem as we believe AppleTV+ is off to a relatively slow start.”

Disney has about $165 billion market cap, and Apple has about $107 billion in cash and securities, he noted, pointing out that Disney has lost about $85 billion, or roughly a third, of its market cap over the past three weeks.

Apple has so far declined to comment to the trade press.

Friday’s market rebound saw Apple's stock rise 12%, to $277.97 and Disney’s rise 11.7%, to $102.52.

This morning, Apple’s shares were up 6.2%,to $264, in pre-market trading, while Disney’s were up 5.9%, to $97.27.

Disney+ accumulated an impressive 28.6 million users (some free, through a tie-in for Verizon customers) in its first four months, according to the company.

But Disney is among the companies already being heavily impacted by the coronavirus pandemic.

The company, which saw its theme parks, experiences and products revenue grow 6%, to $26.2 billion, last year, closed its theme parks on March 14, through at least the end of this month. 

Meanwhile, MoffettNathanson Research estimates that Disney’s ESPN could lose about $241 million in advertising if the NBA’s suspension continues through the end of the regular season, and the company’s ABC network could lose $240 million in playoff game advertising. 

That would be a large chunk of Disney’s combined network ad revenue, which last year totaled $884 million. 

At least in the short term, the company also stands to lose millions in movie ticket sales on delayed first-run releases. 

Disney last year saw its global box office rise 1%, to $42.2 billion.

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