Following Apple's debut of its Vision Pro headset at its Worldwide Developer Conference (WWDC) on Monday, Needham analyst Laura Martin doubled down on her take that the tech giant should acquire the entertainment company.
"AAPL needs to buy DIS to drive adoption of Vision Pro," she wrote in a note published on Tuesday. "The fact that DIS CEO Bob Iger was on stage touting AAPL's Vision Pro goggles demonstrates the compelling strategic fit between DIS's content and AAPL's wearable technology."
"At $3,500, we expect adoption to be slow. However, if AAPL buys DIS, its storytellers could create unique content to drive consumer adoption of AAPL's Vision Pro goggles," the analyst added.
Disney's stock shot up 4% as soon as Iger began speaking at Monday's event. The executive touted a new partnership between the two companies centered on the headset. Users will be able to watch movies and TV shows from Disney+, in addition to a more immersive sports viewing experience.
Disney shares have since leveled off, but the positive move to the upside feeds into longstanding rumors surrounding a potential merger between the two companies.
Martin explained how exclusive content will be key to driving sales of the new headset, referencing how Steve Jobs was able to secure iPod adoption by having music companies sell him individual songs.
"Nobody would have bought an iPod unless there was content on it to drive adoption," she said. "[The VR headset] isn't a massive product, so you have to have content that gets people to want to use it."
Martin emphasized the benefit to Apple would be securing, not only the IP, but also the storytellers.
"You can't force Disney content makers to do anything unless you own them," she said, brushing off suggestions a partnership would suffice as opposed to full-blown ownership given Disney would want to protect its P&L (profits and losses) and maximize revenue.
"My idea would be it'd be exclusive to this one platform," she said, adding, "It's worth more to Apple to have these storytellers and tell stories specifically for an iPhone or an iPad or a watch."
Martin cited Disney's lack of a successor to Iger, coupled with its shrinking linear television business, as key catalysts for a merger, adding Apple's $90 billion in annual free cash flow would help fund content creation.
Still, a big question mark centers around the parks business, in addition to regulatory hurdles.
"I don't think Apple wants the parks, but I think the parks are really a good business standalone. Private equity or another kind of REIT or real estate buyer would be a logical place," she said.
In terms of regulation, the analyst said it's not an impossibility for a deal of this magnitude to receive approval.
"The way the laws are written here, it's not anti-competitive to have a hardware company, or let's call it a distribution company, own a content company," she said, referencing how Comcast was able to merge with NBC, which was a similar size to Disney at the time, in addition to Amazon's recent purchase of MGM for $8.45 billion in 2021.
"It is possible the regulators would try to actually block it. But once you go to court, all the precedents allow content to be bought by distribution," she said.