Apple (AAPL) has spent the past 30 years hitting a lot of home runs. It launched everything from the iMac to the iPod to the iPhone, to the iPad, Apple Watch, and AirPods. What’s more, it’s pushed deeper into recurring revenue businesses with its AppleCare, Apple Music, and Apple TV+.
But according to Wedbush analyst Dan Ives, the tech titan has made one major misstep: not buying Netflix (NFLX). Ives, who has an outperform rating on Apple’s stock, said that doing so would have put the tech giant in a better position in the current streaming wars dominated by Netflix, Amazon (AMZN), and Disney+ (DIS).
“The biggest strategic mistake, in my opinion, from Jobs and Cook over the last 10 to 12 years, is not acquiring Netflix a number of years ago,” Ives told Yahoo Finance Live, referring to the deceased founder and former CEO, Steve Jobs, and the current CEO, Tim Cook.
But that doesn’t mean Apple won’t continue to perform. In fact, Ives says that the company’s market capitalization, which currently sits at roughly $2 trillion, will hit $3 trillion by the end of 2021.
Apple needs to buy a studio
Analysts and pundits have been pushing for years for Apple to purchase Netflix, which is considered the service to beat in the streaming wars. But Apple doesn’t typically make big, splashy acquisitions. Apple’s most public pick-up in recent history was the headphone company Beats back in 2014.
Buying Netflix would have given Apple a huge stake in the streaming video industry, preventing it from having to build its own offering from scratch. So far, the major releases the company has include “The Morning Show,” “Ted Lasso,” and “For All Mankind,” and while they’ve gotten audiences’ attention, none have become the kind of cultural force that the likes of Netflix and Disney+ have unleashed with shows like “Tiger King,” “The Queen’s Gambit,” and “The Mandalorian.”
Apple doesn’t release subscriber numbers for TV+, but Netflix reported during its last earnings call that it has topped 203 million global users, while Disney+ hit 94.9 million subscribers a little more than a year after its launch in November 2019.
According to Ives, the only way for Apple to catch up to the top dogs in the streaming space is to buy a major Hollywood studio of its own.
“We’ve talked about an MGM, a Lionsgate, an A24, otherwise they’re going to continue to sort of be on the outside looking in,” Ives said. “And that’s why I think this is something they’re going to be forced into...because it’s all about content.”
Ives said Apple TV+’s relatively slim content catalog is akin to owning a mansion but having little to furnish it with.
“That's the problem when it comes to this arms race we’re seeing especially with Disney and of course Netflix at top of the heap,” he said.
Apple’s iPhone and a future car
Of course, the iPhone, the little rectangle that’s been practically printing money for Apple since 2007, continues to be wildly popular for the company. Its iPhone 12 line, Apple’s first to feature 5G cellular technology, has performed particularly well.
According to Ives, Apple could sell as many as 240 million to 250 million iPhones in 2021. That, Ives said, could push the company’s market cap past $3 trillion.
Importantly, that supposes that Apple continues to see record sales of the iPhone similar to how the company performed in its most recent quarter where it saw revenue of $100 million.
Looking forward, if the rumors prove true, Apple could get into the electric car space by teaming up with an automaker like Hyundai. That would open the company up to a market worth trillions and put it in direct competition with Tesla (TSLA).
It would also help the company better diversify its offerings outside of the iPhone and iPhone accessories. Still, it’s unclear when, and if, Apple will make the transition to the automotive world.
Recent reports indicate that while it is talking to vendors for sensors that will help the Apple car offer self-driving capabilities, the company has also slowed talks with Hyundai — leaving the entire enterprise up in the air for now.
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