Cramer: Forget Apple buying Activision, Sonos or Netflix (video)

Don’t buy those companies, says Mr. Mad Money, buy this company.

From Jim Cramer’s This Market Has a Terrible Case of Attention Deficit Disorder:

Now this morning JP Morgan’ s Apple analyst posited a host of acquisitions that could keep that service stream flowing: Activision Blizzard (ATVI) , Sonos (SONO) and Netflix (NFLX) being the most prominent.

I was a bit surprised at this. I know I, for one, pushed hard for Apple to buy Netflix at $25. They didn’t want it. I doubt they want it at $349.

Activision Blizzard has had a series of surprisingly weak quarters and I can’t think about why they would want to ally themselves either with the declining Activision programs or the video games themselves as that business seems to be slowing.

Sonos? Doesn’t move the needle. I think the idea to buy a house sound system company for a couple of billion would be poorly perceived. Maybe desperate even.

If Apple wants to buy something to fulfill Tim Cook’s vision of saving lives with the Apple watch he should do something that gets that handshake going between the medical establishment and the watch itself. A partnership with Johnson (JNJ) on A-Fib or with Mayo Clinic on congestive heart failure would be terrific and you would pay $10 a month for that but I just want all my medical records from all different hospitals to talk to each so they can be on my watch. We’ve talked about this before. Now, though given the stock is well above where it was [on Jan. 8] when Cook talked to us — up $20 to be precise — we have to hope that something’s going on besides the trade talks.

UPDATE: Cramer apparently forgot that he had a healthcare play he wanted to pump. So he added this video:

Cramer Remix: Apple’s next move in health care could be with Dexcom from CNBC.

My take: I’d love to be a fly on the wall when a segment like this gets pitched. Where do these ideas come from? What kind of due diligence is done? Who has final say?

Dexcom, by the way, makes continuous glucose monitoring systems for diabetes management. The stock had a nice January and responded well to Cramer’s plug yesterday.

4 Comments

  1. Gregg Thurman said:

    Trade will be behind us in the next month or two, WS has finally seen the light on Services, and the US$ seems to be declining (albeit slowly) against major currencies.

    Couple that with the rapidity that AAPL is recovery from December’s overly pessimistic selloff, and I have this gut feeling AAPL establishes a new all time high before this coming December.

    De con does look better than the usual acquisition suspects. It can be had relatively cheap when compared to the like of Netflix and has its own competition moat (PATENTS) that will aide Apple’s efforts tremendously, not to mention researchers and engineers.

    1
    February 5, 2019
  2. Fred Stein said:

    Tim said healthcare would be Apple’s (his) legacy.

    At the macro level, heath is $16T world wide. It is build around a mainframe mentality, where the users have to adapt to the centralize massive capital equipment with highly trained, supply constrained experts (doctors) as gate keepers. Vast numbers of world’s population access little or none of its capabilities.

    There is no silver bullet. Apple will take on the highest ROI (for the end-users) cases and increment over time. The best example is ECG. Frequent lower quality readings are far better at predicting a heart attack than once a decade ECG’s at a hospital.

    2
    February 5, 2019
  3. Gregg Thurman said:

    From Dexcom’s latest 10Q (11/6/2018).

    We have incurred operating losses since our inception and have an accumulated deficit of $619.2 million at September 30, 2018. As of September 30, 2018, we had available cash, cash equivalents and marketable securities totaling $668.7 million and working capital of $720.2 million…We believe our working capital resources will be sufficient to fund our operations through the next twelve months.
    (emphasis mine)

    Dexcom has a market cap of about $13.77 Billion based on a PE of ~84 (PE is based on future revenue and profitability growth). Revenue grew during FY2018 44% YoY. Ownership is 99% institutional. In my opinion, DXCM is a speculative investment in the health devices industry.

    DXCM is up YoY 147%. If Apple did pursue Dexcom I think it would have to pay at least a 50% premium for it, making such acquisition cost at least $20 Billion.

    Apple could make such an acquisition in an all-stock deal without diluting share count due to its buyback program. Apple’s financial strength (fund future growth) and focus on health via the Apple Watch could be very attractive to DXCM’s investors.

    1
    February 5, 2019
  4. From Friend-of-the-blog Tim Bajarin:
    “I use the Dexcom blood glucose monitor and it has changed my life and helped me manage my diabetes in important new ways. This would be a brilliant move for Apple should they decide to do this. Dexcom represents one of the more important health monitoring trends that starts with blood sugars but could be expanded to many other health monitoring areas in the future.”

    0
    February 5, 2019

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