Apple, Inc. (NASDAQ: AAPL) is expected to unveil its highly anticipated Apple TV streaming video service on Monday. The special event takes place at Apple headquarters in Cupertino starting at 1 p.m. ET.
Apple investors are hoping the company reveals key details about the streaming service such as pricing and launch date. CNBC reported iPhone and iPad users could also get free access to original content.
But while speculation has run wild about what's coming on Monday, Recode cited people who have spoken to Apple about its plans who claim Apple is not yet ready to take on Neflix, Inc. (NASDAQ: NFLX) and will instead be focusing on distribution of third-party streaming video subscriptions.
Netflix CEO Reed Hastings said the streaming giant decided not to integrate its service with Apple’s platform, telling reporters the company doesn’t want to “get too distracted” with what competitors are doing.
The streaming service is a key part of the Apple bull thesis, which is centered around Services segment growth picking up the slack of plateauing iPhone sales. Several analysts have weighed in on the impact Apple investors can expect from the streaming service. Here’s a sampling of what they’ve had to say.
Monetizing iPhone Users
Tigress Financial's Ivan Feinseth said the new streaming video and rumored subscription magazine service will help further monetize Apple’s iPhone user base of more than 900 million customers.
“The new services will be integrated as part of an iPhone and iPad software update iOS 12.2 which also includes an update to Apple Pay, which will support the new credit card partnership with Goldman Sachs Group Inc (NYSE: GS),” Feinseth wrote in his daily newsletter.
Needham analyst Laura Martin said the streaming service will make Apple’s 900 million iPhone users more valuable than ever.
"Our 1Q19 proprietary survey tells us that, whether or not Wall Street believes AAPL is an ecosystem company, its users do," Martin wrote.
Wedbush analyst Daniel Ives said he values the streaming business at $15 per Apple share.
“If Apple executes with minimal speed bumps and aggressively acquires content, given the company’s massive installed base and unmatched brand loyalty we believe reaching 100 million subs in the medium term (3 to 5 years) is a realistic goal that could translate into a $7 billion to $10 billion annual revenue stream over time for Apple and further cement its installed base and halo effect,” Ives wrote.
iPhone Sales Still The Cash Cow
Raymond James analyst Chris Caso said Apple’s iPhone business is so large, the streaming service would have to be three times the size of Netflix’s current business to have a meaningful impact on Apple earnings.
“While we don't yet know the full details of the offerings, we think we know enough to be able to make modeling assumptions, and even during the event Apple won't typically provide many financial details aside from pricing,” Caso wrote.
Citi analyst Jim Suva said that, despite aggressive streaming platform and content spending, Apple will likely raise its buyback authorization by $100 billion in April and continue to generate $60 billion and $65 billion in cash flow per year.
“From a holdings perspective, Apple shares are no longer in the SP500 Growth Index Funds and have completely transitioned to being represented in the Value Index Fund, yet in our marketing meetings, many growth investors have a negative view on the shares with short interest as a % of free float the highest it has ever been over the past 2 years,” Suva wrote.
Ratings And Price Targets
- Wedbush has an Outperform rating and $215 target.
- Raymond James has a Market Perform rating and no target.
- Needham has a Strong Buy rating and $225 target.
- Citi has a Buy rating and $220 target.
Apple's stock traded around $193 per share Friday afternoon.
Analyst: Video Service Highlights Apple's 'Law Of Large Numbers Problem'
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|Mar 2019||Needham||Upgrades||Buy||Strong Buy|
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