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Though it’s probably too early to speak about it, but the Disney takeover by Apple seems to be quite real these days. Disney (DIS) stock is rising in the pre-market today.
It seems like the Walt Disney Company (NYSE: DIS) takeover by Apple Inc (NASDAQ: APPL) is something that may be really possible soon. This is all due to the COVID-19 situation and its effects on the Disney business model. Sources say that though Disney has a lot going for it during this period, several things are working against it as well.
Disney has had great success with its streaming business division. This success comes as most of the global population is restricted due to the coronavirus. The launch of Disney+ in a row of new countries proves that the company has what it takes to make things happen regardless. On the flip side though, all its other business units are bleeding.
However, Disney stock (DIS) is not doing well these days. Though as at the time of writing this story, Disney (DIS) stock price was at $97.25, +3.32 (3.59%) at the pre-market, it is still lower than it used to be a year ago. At that time, DIS was trading around $114 and in November 2019 its price was over $150.
Disney Takeover by Apple May Happen Due to Closure of Disney’s Theme parks
Disney’s theme parks and resorts have been closed worldwide due to the COVID-19 pandemic. Disney’s parks account for about 37% of the entertainment giant’s revenue. The parks won’t be open until sometime in June. That is if the COVID-19 situation subsides. a quarterly closure of the parks will lead to a $6 billion loss for Disney. If the coronavirus situation continues until next year, Disney’s losses could reach up to $25 billion worldwide from the business unit.
This means that the entertainment giant is already one leg down in its business. The movement restrictions have hurt the US and global entertainment industries. Disney’s recent outings at the box office headliner “onward”, was extremely disappointing, to say the least.
Sources say that the movie flopped in terms of sales due to the shutdown of cinemas across the United States and in other countries. Under normal circumstances, the movie could have grossed about $500 million. That is according to studio management.
Disney started the year on a strong note. $6.8 billion in cash at the start of the year seemed great under normal circumstances. 2020 has been anything but normal. Delays of box office movies and migration of other content to its digital platforms have occurred. Its $48 billion debt from last year plus $6 billion extra debt should have been a walkover.
The way things are going, it appears that Disney will struggle to maintain positive cash flow. Its current market capitalization of about $169.5 billion makes it an easy target for Apple. Going by the state of things as per COVID-19 things are going to get worse.
Apple Could Be Disney’s Savior
Apple is known for other things apart from being an innovative company with a trillion-dollar valuation. It is also known for being a cash-rich company. If things continue to slide because of COVID-19, Apple could use its $100 million-plus war chest to its advantage by acquiring Disney.
Disney may have $12 billion cash to survive and keep its commitments till the middle of the year. In the absence of a vaccine (till next year) or effective treatment, the situation will continue to slide. The entertainment company isn’t generating any new content. But so are others as well.
Apple TV service has received a poor reception. This won’t dent Apple’s revenues. An acquisition could boost its earnings as digital streaming now becomes a part of popular culture. It also expands Apple’s business model; an ecosystem that has about 1.5 billion devices. Disney could be a new addition to this if Apple plays its cards right.