The $3.2B Apple-Beats rumor: What the analysts are saying

Dr. Dre: “Billionaires boys club for real, homey.”

FORTUNE — “Before formulating a strong opinion it would be nice to hear Apple’s rationale.”

So wrote UBS’ Steven Milunovich Monday in response to press reports that Apple (AAPL) is ready to spend $3.2 billion on Dr. Dre’s and Jimmy Iovine’s Beats Electronics.

But that didn’t stop Milunovich — or a half-dozen other sell-side Apple analysts — from going ahead and issuing strong opinions. Excerpts from the notes we’ve seen:

Steven Milunovich, UBS: Off-Beat acquisition. “The potential purchase of Beats Electronics for $3.2bn as discussed in the press could make sense given that (1) the purchase price is reasonable if Beats revenue is about $1.4bn with high margins; (2) Apple uses the music service to complement its mediocre success with iTunes Radio (see p3); and (3) headphones and their designers fit into the company’s wearable plans. Before formulating a strong opinion, it would be nice to hear Apple’s rationale… Apple has not promoted the brand of a company it has acquired, but it does have sub- brands: iPod, iPhone, iPad, Mac. People use the product name knowing Apple makes them. “Beats by Apple” isn’t all that different. The Beats brand is attractive in its appeal to young people and to African-Americans. Although product quality can be debated, the image can’t: “Other headphones look like medical equipment,” Iovine said. Apple gained lifetime users by getting Macs into schools, which Beats might do for music.” Rating: Buy. Price target: $625.

Brian White, Cantor Fitzgerald: Choosing Dr. Dre Over Drones? “With over 20 million tracks, no ads, high audio quality, and a very creative user interface, Beats Music markets itself as “the first music service that understands you.” Previously known as “Project Daisy,” Beats Music uses proprietary algorithms to offer consumers the appropriate music for their mood. As described by Beats Music, “Tell Beats Music where you are, what you’re feeling and who you’re with and we’ll serve you a unique stream of music that fits your situation perfectly.” We believe this feature could also have applications for movies and potentially other media. A subscription to Beats Music costs $9.99 per month and is available on iOS, Android, Windows Phone, and on the web.” Buy. $777.

Gene Munster, Piper Jaffray (Saturday): Rumored Beats Acquisition Likely To Bring Iovine On. “Apple’s motivation to acquire Beats for $3.2 billion (still unconfirmed) appears to be to bring Jimmy Iovine, a founder of Beats (and rumored to own 25% of the company) and long time record and film producer, to lead Apple’s content strategy. While gaining [Jimmy] Iovine is a justification for acquiring Beats, we believe that $3.2 billion is a steep price to bring on one high-level executive, given our stance that Beats doesn’t appear to offer anything to Apple aside from a brand – which is not a weakness of Apple’s. The good news may be that if the Beats deal does in fact happen, it may open the door for other larger scale acquisitions that could include something to improve Apple’s Internet services.” Overweight. $640.

Gene Munster, Piper Jaffray (Friday): Sounds like a bad idea. “We are struggling to see the rationale behind this move. Beats would of course bring a world class brand in music to Apple, but Apple already has a world class brand and has never acquired a brand for a brand’s sake (i.e., there are no non-Apple sub-brands under the company umbrella). Separately, we are not aware of any intellectual property within Beats that would drive the acquisition justification beyond the brand. We view a better use of capital for acquisitions to be in the internet services space given that is, in our view, Apple’s biggest weakness. This list would include Yelp, Twitter, Square and even Yahoo.” Overweight. $640.

Toni Sacconaghi, Bernstein: Apple and Beats: What’s the Deal? (Monday) “We struggle with the rationale for this deal on several fronts. While Beats headphones are undoubtedly very profitable on a gross margin basis, it is unclear whether the audio equipment and streaming technology relationships are privileged or hard to replicate. Further, it would seem that iTunes Radio could easily compete directly with Beats Music given the huge iOS/iTunes user base and Apple’s scale, and the fact that Beats Music was only introduced in January and is likely not large on a revenue basis. Finally, it is uncharacteristic of Apple to look do an acquisition this large and with a company that has a separate brand that is integral to its offering.” Outperform. $615.

Walter Piecyk: BTIG. Beats me. “Investors pay attention to changes in patterns. Some are stark like a return to EPS growth while others are subtle like the inflection point when accelerating ARPU growth begins to decelerate. A $3 billion purchase by Apple following decades of acquisitions that haven’t topped $400 million is a change in pattern that will justifiably generate some questions for management and perhaps the Board of Directors to address. Let me tone down that hyperbole a bit. $3 billion is less than 2% of the company’s cash and less than 10% its annual free cash flow. So in the grand scheme of things, its not a deal that is going to have a material impact on results but the c hange in pattern is what drives the questions.” $600.

James McQuivey: Forrester. “Given Apple’s historical tight-fistedness with the contents of its huge treasure chest, it wouldn’t be surprising if the company backed away, especially after last night’s trial balloon (if it was such) sputtered so badly. But let’s consider this fact: Apple is not a stupid company. Sure, Apple can make mistakes (Apple Ping, anyone?) but when it trips over itself, it usually does so on the way up a hill worth climbing. Which leads me to this flight of fancy: What if, in buying Beats, Apple knows something that we do not, Apple sees something that we do not? If true, what could it be?”