Apple Inc. (AAPL)’s Acquisition of Beats Electronics from an Analyst Standpoint


Apple Inc. (NASDAQ:AAPL)‘s acquisition of Beats Electronics has been a very mediated subject recently, and has sparked many interesting discussions. Of late, Toni Sacconaghi, a senior research analyst at Sanford C. Bernstein, in an appearance on CNBC, provided his opinion on Apple’s latest acquisition and what this investment means for the tech giant. Under the terms of the deal, Apple will pay $3.0 billion for Beats and the founders of the company, Dr. Dre and Jimmy Iovine will join Apple.

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Mr. Sacconaghi considers that the deal is worth its value, because consumer electronics is a represents a profitable business. Moreover, the deal will also help Apple Inc. (NASDAQ:AAPL) grow because it also brings new talent to the company.

“My issue is that I would rather if they have been deploying this capital into something where there’s more growth potential for the company going forward than music,” he added.

In Mr. Sacconaghi’s opinion, the deal is a good one from the financial point of view, as well, because Beats Electronics is a high margin business, but taking into account that Apple Inc. (NASDAQ:AAPL) already has a $6.5 billion music business in form of iTunes, it could have hired some other talented people and could have done something more “forward looking” with this capital. He also mentioned that earlier this week, his firmed has raised the target price for Apple Inc. (NASDAQ:AAPL)’s stock to $700.

“We do believe that we are going to have an iPhone 6, we believe that there will be at least one option with a larger screen. We think the price on that device might be higher, which actually is very good for Apple Inc. (NASDAQ:AAPL)’s economics. We believe a watch will be introduced before year-end. So the collective portfolio will be as strong as ever and the stock is highly anticipatory and so as people get more comfortable about the timing and the details around these products, we believe the stock will continue to appreciate. It is very inexpensive on a cash flow basis at current level,” Mr. Sacconaghi concluded.

Watch the full video below:

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