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.

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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.

"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.

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.

"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

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Top Rated Comments

rkRusty Avatar
62 months ago
Apple Card, now brought to you by JP Morgan.
Score: 51 Votes (Like | Disagree)
Solomani Avatar
62 months 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.
Score: 44 Votes (Like | Disagree)
telepheedian Avatar
62 months 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.
Score: 32 Votes (Like | Disagree)
gugy Avatar
62 months 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.
Score: 30 Votes (Like | Disagree)
TheRealTVGuy Avatar
62 months 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?
Score: 20 Votes (Like | Disagree)
OceanMindedBoy Avatar
62 months 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.
Score: 20 Votes (Like | Disagree)