Two Deals that Could Shake Up Wall Street

There could be some changes in big companies during 2018 that could have a boomerang effect through major sectors of the market. While no one knows for sure, there are strong rumors that these deals may occur before the year is through. Here are the two deals that you may want to watch for in 2018.

Apple Buying Netflix

Apple stands to benefit from the new tax law that the United States Congress finally approved in late December 2017. Even before the tax deal closed, Apple had already brought back over $200 billion of its stock, and they may choose to return money to the United States after they work out the deals of the new tax plan.

They are poised to become the first trillion dollar company in history, and acquiring Netflix may help them meet this goal. One weakness that Apple has had is that their content continues to lag behind Amazon, and the acquisition of Netflix would go a long way in solving this problem. Under Reed Hastings’ leadership, Netflix already generates about $10 billion in revenue annually, and Apple should be easily able to at least double that amount

. The addition of Hastings to the leadership team also add depth and knowledge to Apple on how to produce or buy content. Including a complimentary subscription to Netflix for six months or a year could drive the sale of Apple televisions up as more people than ever before are choosing to cut the cable plug.

Amazon buying Target

The second deal that many think will happen in 2018 is that Amazon will purchase Target. Amazon’s closest competitor is Walmart, and the purchase of Target would let Amazon own about 50 percent as many brick-and-mortar stores in the United States as Walmart operates since the company already purchased Whole Foods last year.

Despite the fact that the company would probably have to suffer a big hit to its balance sheet in order to acquire Target, many believe that the company will do so in 2018. This would be a signal that Amazon believes that a balance between online and brick-and-mortar stores is where the future lays. Target’s main demographic is moms, and it is a market that Amazon already actively pursues with their prime time videos. Like Walmart, Amazon would also have the option of offering in-store discounts and loyalty programs to drive sales up.

Many believe that these two deals are likely to happen in 2018, and it unlikely that the United States government would take any action to stop them from being a monopoly. Therefore, watch for them to happen within the next 12 months.

Article written with insights from Edward Schinik, CFO of Yorkville Advisors

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