Adobe (ADBE), Box (BOX), GoPro (GPRO) and Tesla (TSLA) Highlighted at Potential M&A for Apple (AAPL)

In a note today, FBR Capital analyst Daniel H. Ives highlighted an M&A Christmas List for Apple (NASDAQ: AAPL) CEO Tim Cook.

"Heading into 2016, Apple and Cook are entering a critical juncture from a product, growth, and strategic perspective. While Apple has built its golden consumer empire around its unrivaled iPhone franchise, we believe Cook's crystal ball is now focused on building out new technology growth frontiers/product areas for the next decade. While 2016 will be the year of the highly anticipated iPhone 7 release (potentially major design changes in store), and with the 6s growth continuing to be the major debate around the Apple story near term, in this note we take a look at potential M&A ideas that Apple could consider over the coming year. Although we clearly can see Cupertino focusing on a number of skunkworks initiatives (e.g., Project Titan, virtual reality-Faceshift, etc.) in 2016 and not pursuing major M&A prospects, with $200 billion of cash in the coffer (and growing), we can finally envision Apple making a larger acquisition, as the conditions are ripe for Cook to make a move, in our opinion."

The firm looks at top potential acquisitions for Apple in 2016 (in no particular order): (1) Adobe (NASDAQ: ADBE), (2) Box (NYSE: BOX), (3) GoPro (NASDAQ: GPRO), and (4) Tesla (NASDAQ: TSLA) (long shot).

• Penetrating enterprise segment key; Adobe or Box could fit the mold. A key focus of Apple and Cook into 2016 is around the enterprise push (~10% of revenue), as the company is aggressively ramping its corporate presence with the iPad Pro and recent partnerships (IBM). Box would give Apple an avenue into enterprise storage and enable it to expand its product tentacles (hardware/storage) into the enterprise cloud frontier. Coupled with the existing IBM partnership, Box would enable Apple to further ramp its consumer iCloud platform into the enterprise market. Switching gears, Adobe would provide a nice pipeline into the enterprise; gaining control of the dominant platform for creatives could give Apple a boost in selling its hardware (Macs, iPads, iPhones) into this all-important user base. Apple would also be at the center of the digital transformation within enterprises, as Adobe’s Document Cloud/ Marketing Cloud applications are helping enterprises grapple with the growth of digital marketing, proliferation of mobile devices in the enterprise, and IOT.
• Walking down the aisle with GoPro? We believe an acquisition of GoPro would make sense for Apple; action cameras are uniquely positioned at the intersection of Apple’s smartphone, wearables, and multimedia offerings. Additionally, GoPro’s new product cycles could open the door to areas where Apple’s competitors are investing heavily (e.g., drones, VR), and Cupertino has been playing catch-up. We also see strategic value in GoPro being integrated with Apple’s strong multimedia ecosystem (e.g., iTunes, Apple TV, etc.).
• Tesla a long shot. Apple's electric car endeavor, code-named Project Titan (which we peg at a 60%–70% possibility by 2020) appears to be a key long-term growth initiative for Apple over the next decade. In our view, acquiring Tesla’s advanced battery technology would greatly accelerate Apple’s entrance into the next-generation auto arena, and we estimate valuable economies of scope could be realized while transitioning to mass-market volumes (e.g., consumer electronic batteries, automotive software, etc.). While Apple will most likely slowly build out its auto R&D, a Tesla deal would clearly accelerate this move.

The firm maintained an Outperform price target of $175 on AAPL.

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For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $115.62 yesterday.

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