Apple Inc. is said to roll out a series of bundle packages that will allow customers subscribe to several of the tech giant’s digital services at a lower monthly price.
Apple (AAPL) is getting ready to introduce the bundles under the so-called “Apple One” subscription service in October alongside the launch of the next iPhone line, according to a Bloomberg report. The bundles are designed to lure customers to subscribe to more Apple services, which will generate more recurring revenue.
As part of the new service, consumers will be able to choose between differently priced tiers of the Apple One bundle, which will be offered at a cheaper monthly price than subscribing to each product separately. The basic Apple One package will likely bundle together Apple Music and Apple TV+. The next tier, for a higher fee, will add the Apple Arcade gaming service, and the next more expensive tier will include Apple News+.
The most expensive tier will offer users subscriptions to Apple Music, Apple TV+, Apple Arcade and Apple News+, as well as extra iCloud storage for files and photos.
In addition, Apple is also developing a new subscription for virtual fitness classes that can be accessed through apps on the iPhone, iPad and Apple TV and will be offered in a higher-end bundle with the rest of its services. The service would compete with virtual classes offered by companies, including Peloton Interactive Inc and Nike Inc.
Apple now has over 550 million paid subscribers, 130 million more than a year ago, with expectations to reach 600 million by December this year.
Shares in Apple have surged 57% this year as stay-at-home orders during the coronavirus pandemic have been good for business. The pandemic has created opportunities for companies like Apple who are weathering the crisis relatively well and are looking to increase their reach and boost market share. (See Apple stock analysis on TipRanks)
Jefferies analyst Kyle McNealy recently raised Apple’s price target to $465 from $405 and maintained a Buy rating on the stock, citing a much clearer path to the 5G cycle.
“Near-term uncertainty has been de-risked and we now see a clear path to the 5G cycle, which we expect to start in late October for Apple,” McNealy wrote in a note to investors. “We continue to see multiple catalysts for fiscal ’21 that can drive outperformance versus conservative Street expectations, including 5G, iPhone SE, Wearables, continued Services growth, potential for increased carrier device subsidies, and contraction of the retail-wholesale margin.”
Overall, the rest of the Street is cautiously optimistic on the stock with a Moderate Buy analyst consensus. In light of this year’s sharp rally, the $432.12 average price target implies 6.1% downside potential to current levels.