As Apple tops a market cap of $800 billion for the first time ever many investors believe there is “something going on behind-the-scenes”. The company has a $250 billion war chest and many analysts are speculating on a potentially mega takeover in the short to medium term. This is placing extreme pressure on the directors of Apple but history shows us that the company prefers to grow naturally as opposed to through an acquisition led strategy. So, will the tail wag the dog and force Apple into a large acquisition?
A war chest of $250 billion
While there is no doubt that Apple has been one of the success stories of recent times, the company has struggled to spend its ever-growing war chest. That war chest now stands at $250 billion, more than the market capitalisation of many companies, but Apple is struggling to find a sensible way in which to use these funds. There has been talk of a share buyback, deemed boring by investors, and there have been a number of possible bid targets mentioned such as Tesla, Netflix, etc.
We have covered the rise and rise of Apple shares this year on numerous occasions but did you know that analysts have increased their price target 30 times already this year. The latest price target offers upside of around 8% at $165 but are we in danger of a stand-off between investors and the company?
What happens after the next iPhone launch?
In amongst all of the speculation regarding a potential acquisition we are only just a few weeks away from the next iPhone launch. Whether or not this has been the catalyst to the recent share price rise is debatable but what happens after the next iPhone has been launched?
At this moment in time there are no signs that Apple is even considering a large acquisition which will disappoint many investors. We may see further upside in the short to medium term as speculation about the next iPhone reaches fever pitch but then we may fall into a news vacuum. If there is no concrete news on a potential takeover target there is every chance that short-term investors will bank their profits on Apple shares and move on. Unless something drastic was to happen it is very difficult to see Apple directors changing their long-term strategy with regards to mega acquisitions. In many ways, if they gave in to pressure from investors to spend the $250 billion war chest, is this not a sign of weakness?
Is Apple at a crossroads?
The reality is that Apple is at a potential crossroads in its future because the iPhone and other popular products will at some point see their income start to diminish. Apple will need to be well ahead of the curve and have expansion plans in place before income starts to fall otherwise investors may desert the company. It is ironic that investors have bought Apple shares because of the way the group has been managed over the years only for some investors now to call for a change in the company’s investment strategy.
Many people thought that Apple would struggle when Steve Jobs passed away but the company has managed to grow and maintain forward momentum. Directors should always be the ones in control of the future strategy of any company but the cries from investors are certainly growing louder. Will Apple eventually give in and pursue a mega takeover or, as Steve Jobs once said, only pursue deals which are good for its customers as opposed to “greedy shareholders”.