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Apple Says TV+ Service Won’t Harm Results, Rebutting Goldman

Mark Gurman and Nico Grant

(Bloomberg) -- Apple Inc. said a new video service won’t have a material impact on its financial results, seeking to counter research from a Goldman Sachs analyst who cut his share price target on concern that aggressive pricing of the TV+ offering will trim profit.

Earlier this week, Apple outlined a strategy that involved lower prices on several devices and services, including a monthly cost of $4.99 for TV+. It will also be free for one year with purchases of new Apple devices. This is relatively rare for a company that has historically charged premium prices to support healthy profit margins.

Rod Hall, the Goldman Sachs analyst who covers Apple, cut his price target on Apple shares to $165 from $187, saying the company’s plan to offer a trial period for TV+ was “likely to have a material negative impact” on average selling prices and earnings per share.

“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,” Apple said in an email.

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The stock jumped after the statement, trimming losses from earlier in the day. It traded down 1.8% at $219 at 2:56 p.m. in New York.

The TV+ service is entering a crowded video-streaming field that already includes Netflix Inc., Amazon.com Inc., Hulu and AT&T Inc.’s HBO. In November, Walt Disney Co. plans to launch a Disney+ streaming service, with a giant catalog of titles, for $6.99 a month. Netflix’s entry-level subscription is $8.99 a month in the U.S.

Apple, which doesn’t currently have a back catalog of content for TV+, announced the $4.99-a-month pricing on Tuesday, sparking a rally in its shares and declines in Netflix and Disney stock. In India, the TV+ service will be 99 rupees ($1.40) a month.

(Updates with background on TV+ in final paragraphs.)

To contact the reporters on this story: Mark Gurman in San Francisco at mgurman1@bloomberg.net;Nico Grant in San Francisco at ngrant20@bloomberg.net

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net, Alistair Barr

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.