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An analyst's suggestion that Apple buying GoPro would fit the tech giant's strategic goals sent GPRO stock soaring 11.5% Thursday (yesterday).
Back in September, Northland Capital analyst Gus Richard said, "GoPro would be an interesting acquisition for Apple from both a hardware, software and content prospective." That news lifted the GPRO stock price 12% over the following three days.
"We believe an acquisition of GoPro would make sense for Apple; action cameras are uniquely positioned at the intersection of Apple's smartphone, wearables, and multimedia offerings," Ives said in a research note. "Additionally, GoPro's new product cycles could open the door to areas where Apple's competitors are investing heavily (e.g., drones, VR), and Cupertino has been playing catch-up. We also see strategic value in GoPro being integrated with Apple's strong multimedia ecosystem (e.g., iTunes, Apple TV, etc.)."
The notion of AAPL buying GPRO definitely has merit…
Why It's Easy to See Apple Buying GoPro
Financially, an Apple acquisition of GoPro is no problem. GoPro has a market cap of just $2.5 billion. And even with a bit of a premium, any Apple-GoPro deal is unlikely to exceed $3 billion. That's about what Apple paid for Beats Electronics last year.
Apple, of course, is flush with cash. It has about $203 billion in cash and equivalents on its balance sheet.
Now let's examine some of Ives' points more closely.
Wearable tech: Apple has already ventured into the wearable tech arena with the Apple Watch. Research firm IDC estimates the wearable tech market will grow 173.3% in 2015 to 72.1 million units, and will grow at a compound annual growth rate of 42.6% over the next five years. Adding GoPro's popular wearable cameras would give Apple a bigger presence in this growth market.
And while many suspect Apple is already working on a wearable camera based on a patent filing revealed in January, buying GoPro would give any existing efforts a huge boost.
But while the wearable camera business is the most obvious reason for Apple to buy GoPro, these considerations are actually more compelling…