Shares of Apple (AAPL) are on the rise after the company introduced a subscription video service, a subscription news service, a subscription gaming service, and a physical Apple Card at a Services event held yesterday. While analysts at Canaccord and Piper Jaffray raised their price targets on the shares following the highly anticipated event, their peer at Wells Fargo argued that the Apple TV+ leaves investors with more questions than answers. Meanwhile, Morgan Stanley analyst Benjamin Swinburne said that he sees the company's announcements in video as "incremental" more than disruptive.
TARGETS RAISED: Following Apple’s "It's Show Time" event, Canaccord analyst T. Michael Walkley reiterated a Buy rating on the stock and raised his price target on the shares to $230 from $185. The analyst told investors that he believes the announcements support Apple's ecosystem approach, including an installed base which now exceeds 1.4B devices globally, to drive strong ongoing services revenue growth. He expects the higher-margin services revenue growth to continue outpacing total company growth. Also reiterating an Overweight rating on Apple following the event, Piper Jaffray analyst Michael Olson raised his price target on the shares to $201 from $187. Olson believes that Monday's announcement raises the possibility of Apple posting service revenue upside in 2019. Meanwhile, Wedbush analyst Daniel Ives argued that Apple needs to "tiptoe into this major strategic initiative" as the success on this front will play a vital role in the services growth for years to come. Ives continues to believe the company has the opportunity of capturing 100M consumers on this streaming content service over the next 3-5 years with this" major, potentially game changing content distribution service." He reiterated an Outperform rating and a $215 price target on Apple shares.
APPLE ANNOUNCEMENTS 'INCREMENTAL': Noting that Apple's TV announcements can be viewed in two parts, namely as an update to its TV app and the launch of Apple TV+ with original content, Morgan Stanley analyst Benjamin Swinburne said he believes that the new channels offering and revamped TV app, if successful, are "incremental" but not a competitive threat to Amazon Channels (AMZN), Roku (ROKU) and Comcast (CMCSA). Apple seeks a position in hardware, as an aggregator and as a publisher, but it is unclear if it has "a leadership position in any [of those three] at this point," he contended. Also not very bullish on Apple's event, Citi analyst Jim Suva told investors that the announcements will not be a major catalyst for the shares as consumers are slow to change their behavior. Still, Suva reiterated a Buy rating and a $220 price target on the stock. Reiterating a Perform rating on Apple, Wells Fargo analyst Aaron Rakers said that the company's introduction of the new Apple TV+ paid subscription service, or more notably Apple's push into original content, leaves him and investors with "more questions than answers." Apple plans on launching Apple TV+ availability in the fall of 2019 in over 100 countries, but provided no details on the anticipated monthly subscription fee, he noted.
NETFLIX IMPACT: Meanwhile, Needham analyst Laura Martin said she sees Apple TV+ posing a direct threat to Netflix (NFLX) given its $2B content budget, expected "priceless appearances by Spielberg, Oprah, Aniston, and JJ Abrams," as well as its 100% consumer awareness and zero marketing costs. The analyst reiterated a Strong Buy rating on Apple shares and stated that the new subscription services should help reduce churn. Not as bearish on the potential impact for Netflix, Chatham Road Partners analyst Colin Gillis, formerly of BGC Financial, argued that Apple "does not excel in creating powerful software and service experiences like it does with hardware." Further, the analyst believes that the new service is "not going to be a Netflix killer." Oppenheimer analyst Jason Helfstein also does not see Apple TV+ as having any negative impact on Netflix. While a reasonable amount of high-income Apple users will likely subscribe, there is no comparison in the amount of original content compared to Netflix, spending $12B/year versus Apple's $1B, he contended. On Roku, Helfstein says the headline is bullish, as the Apple TV will be available on the Roku platform and others, including Amazon Fire and Samsung (SSNLF), reflecting Apple's acknowledgement that the TV OS market is maturing and deciding to pursue an app versus OS strategy.
'SLIGHT INCREMENTAL NEGATIVE' FOR ROKU: Regarding Roku, Citi analyst Mark May pointed out that the Apple TV+ offering should be a "slight incremental negative." Given that the Apple TV app is ad-free and given that popular apps from well-established companies have historically not driven material direct ad revenue for Roku, it is possible that the inclusion of the Apple TV app on Roku devices will not drive meaningful incremental direct ad revenue, May contended. Further, he believes the Apple TV app could cannibalize time spent on other apps on Roku where it is able to monetize ad inventory. Also, given that the Apple TV app will be directly carried on several smart TVs, it could reduce the need in some cases for consumers to purchase a standalone Roku device or a Roku-powered TV, said May, who reiterated a Neutral rating and a $53 price target on Roku shares.
POTENTIAL $100M OPPORTUNITY FOR GREEN DOT: Meanwhile, Craig-Hallum analyst Brad Berning said that details in Apple's Apple Card announcement point to better utilization of Apple Cash, a program powered by Green Dot (GDOT). The analyst believes this could be a $100M annual revenue opportunity over time for Green Dot. Berning added that while this does not eliminate the market's concerns over a Walmart (WMT) renewal, which he continues to believe will most likely happen, it does highlight his view that there will be numerous potential partnership opportunities for Green Dot over time to win as the leading BaaS arms dealer "for the deposit wars ahead." The analyst reiterated a Buy rating and a $115 price target on Green Dot's shares.
PRICE ACTION: In morning trading, shares of Apple have gained about 1.8% to $192.13.