Apple is separating the new smartphones into its usual low-cost versus high-cost categories, with big differences between the two models coming down to the camera, display, and battery life.
iOS 13 & watchOS 6 Now Available
Apple Disputes Goldman Sachs Analyst Report Claiming Free Year of Apple TV+ Will Impact Earnings
Goldman Sachs this morning cut its target price for Apple's stock from $187 a share to $165 a share, claiming Apple's plans to give away free access to its upcoming Apple TV+ service will cause a "material negative impact" on earnings because of how the accounting for the service will work.
Goldman Sachs' Rod Hall said that Apple would account for the one-year free trial as a combined hardware and services bundle discount, which would show lower hardware profit margins.
For those who do not get Apple TV+ for free through a device purchase, Apple is charging $4.99 per month for the entire family. Apple TV+ is set to launch on Friday, November 1.
Goldman Sachs' Rod Hall said that Apple would account for the one-year free trial as a combined hardware and services bundle discount, which would show lower hardware profit margins.
"We believe that Apple plans to account for its 1-year trial for TV+ as a ~$60 discount to a combined hardware and services bundle," wrote Goldman analyst Rod Hall, in a note.Apple in a statement to CNBC disputed Goldman Sachs' negative call and said that it does not expect the introduction of Apple TV+ to have an impact on its financial results.
"Effectively, Apple's method of accounting moves revenue from hardware to Services even though customers do not perceive themselves to be paying for TV+. Though this might appear convenient for Apple's services revenue line it is equally inconvenient for both apparent hardware ASPs and margins in high sales quarters like the upcoming FQ1′20 to December," Hall added.
"We do not expect the introduction of Apple TV+, including the accounting treatment for the service, to have a material impact on our financial results," the company said in a statement to CNBC.Apple is planning to provide one free year of Apple TV+ access to all customers who purchase an iPhone, iPad, iPod touch, Apple TV, or Mac, aka any device able to play the service's TV shows and movies.
For those who do not get Apple TV+ for free through a device purchase, Apple is charging $4.99 per month for the entire family. Apple TV+ is set to launch on Friday, November 1.
Tag: AAPL
[ 195 comments ]
Top Rated Comments
(View all)
1 week ago
That analyst is clueless. He has no idea how powerful, how entrapping and addicting the Apple Ecosystem is. Once Apple customers get sucked into the Apple Ecosystem, it's very difficult to bail out. And often it starts with a Free Trial. Remember all the clueless analysts that said Apple Music would fail? That it would never ever compete or catch up to Spotify etc? LOL
Apple Music also started with free trials.
Apple Music also started with free trials.
1 week ago
I know that Goldman Sachs' credit card division is a very different part of the company than the investment banking analysts' division, but this sure is awkward.
1 week ago
This was a smart move by Apple. If their content is indeed great, people will have time to get used to it and eventually keep it in the long run.
I am hoping Apple at some point creates a master subscription plan that includes all their services and iCloud storage at a fair price for individuals and families. That might entice me jumping into other services that at this point I don't care about it.
I am hoping Apple at some point creates a master subscription plan that includes all their services and iCloud storage at a fair price for individuals and families. That might entice me jumping into other services that at this point I don't care about it.
1 week ago
Is that analyst on crack or something? Giving people the chance to experience Apple TV+ for free for a year will return in greater profits.
1 week ago
Further proof that what's good for the shareholders isn't necessarily the same as what's good for the customers.
Buuuut when your executive teams' bonuses are tied to shares of stock (and their value), is it any wonder the kinds of decisions we see?
Buuuut when your executive teams' bonuses are tied to shares of stock (and their value), is it any wonder the kinds of decisions we see?
1 week ago
This large financial entities should screen their analysts opinions before letting them out to the public.
These narrow minded and cheap analysts are out of control.
A free year of AppleTV+ Is the best advertising campaign Apple could have chosen.
Encourages people to buy Apple products just to get the freebie, and also gives them a chance to try it and become addicted to it.
It's not that often that my professional expertise is relevant on this forum but, let me offer some insight into what is going on here - Revenue Recognition, Bundles, and Multi-Element Arrangements.
To the customer, the service is being offered as free however from an accounting perspective Apple is combining two products into a single hardware + software revenue contract where one of the products is being discounted at 100%. Since this product has standalone value (something called SSP under ASC 606) Apple needs to apply an accounting policy that appropriately estimates how much recurring revenue uplift they will receive from people continuing to use AppleTV+ after the free trial..
What the analyst is concerned about is Apple taking the full $60 and moving it from hardware to services and overstating how much of their revenue growth is coming from selling new services (analysts prefer subscription services growth since it's recurring - so this number accelerating is beneficial to a company).
What is important to note here is that in Jan 2018 the way that every public company reports their revenue numbers changed under new regulation known as ASC 606. Companies, analysts, and auditors still have different opinions on how the principals of this new standard should be applied so disagreements like this have been really common over the past year and will continue to be for a few years. To put it another way.. the bugs are still being worked out with how companies recognize revenue.
Here are some good articles for people who would like more information:
https://www.accountingtoday.com/opinion/welcome-to-year-one-of-asc-606
https://www.investors.com/news/technology/top-line-turmoil-booking-revenue-faster-could-shake-up-earnings/
https://www.accountingtoday.com/news/asc-606-or-666-software-companies-could-face-trouble-from-fasbs-revenue-recognition-standard
1 week ago
For the next 12 months the service isn't worth $1.99 a month with the content.
Maybe next year they can be worth $4.99
Maybe next year they can be worth $4.99
1 week ago
That analyst is clueless. He has no idea how powerful, how entrapping and addicting the Apple Ecosystem is. Once Apple customers get sucked into the Apple Ecosystem, it's very difficult to bail out. And often it starts with a Free Trial. Remember all the clueless analysts that said Apple Music would fail? That it would never ever compete or catch up to Spotify etc? LOL
Apple Music also started with free trials.
1 week ago
Such a strange professional relationship Goldman and Apple have.
Goldman: We back the Apple Card. Get it.
ALSO Goldman: Cuts the Apple stock target price. Don't get it.
Goldman: We back the Apple Card. Get it.
ALSO Goldman: Cuts the Apple stock target price. Don't get it.
[ Read All Comments ]
Burst Mode refers to when the camera on your iPhone captures a series of photos in rapid succession, at a rate of ten frames per second. It's a great way to shoot an action scene or an unexpected...
Apple's Portrait Mode has become a popular way of taking impressive shots using a depth-of-field effect known as bokeh, allowing iPhone users to shoot a photo that keeps the subject sharp with a...
Apple has redesigned the native Camera app on the iPhone 11 and iPhone 11 Pro to make space for the various additional shooting options available in its new flagship phones, and one particularly...
Apple's massive launch week has come to a close, with the iPhone 11, iPhone 11 Pro, iPhone 11 Pro Max, and Apple Watch Series 5 all debuting on Friday. And as if that wasn't enough, Thursday...
With the arrival of the iPhone 11, iPhone 11 Pro and iPhone 11 Pro Max, Apple has introduced an optional new camera feature in iOS 13 that's designed to allow you to correct the alignment of...
For this week's giveaway, we've teamed up with AnyTrans to offer MacRumors readers a chance to win one of Apple's new iPhone 11 Pro Max devices and a lifetime AnyTrans license.
For...
Due to Apple seeding the iOS 13.1 beta prior to the public release of iOS 13, upgrading to a new iPhone may be a bit trickier this year.
In a support document, Apple has provided instructions...
Apple today the golden master version of an upcoming tvOS 13 update to developers, one week after seeding the eleventh beta and more than three months after unveiling the tvOS 13 software at the...
