Next week Apple is announcing its long-overdue streaming video service. Apple’s entry into the suddenly crowded premium video market was inevitable, and Wall Street’s already trying to size up the winners and losers ahead of Monday’s media event.
“It’s show time,” the invites read. The tagline for the event hints that Apple will unveil its long-awaited subscription-based TV service. The launch of a potential TV service would represent yet another way the tech giant is beefing up its services business, as its iPhone unit sales appear to have peaked. But a TV-based subscription offering may not be the only service unveiled during the March 25 event.
Wedbush analyst Dan Ives raised his price target for AAPL stock from $200 to $215. He also says he expects Apple’s streaming video service to reach 100 million subscribers within five years.
Investors can expect Apple to continue aggressively add streaming content partners, according to Ives. He says Apple TV will be a centerpiece of the company’s Services segment revenue growth in the long-term. With iPhone unit sales growth stagnating, a major part of the bull thesis for AAPL stock hinges on Services.
Total iPhone units sold in 2018 dropped 2.7 percent. Apple reported 19 percent Services revenue growth in the most recent quarter. He said:
“The services business remains the wild card in driving the valuation higher for Apple as we estimate the valuation of the services franchise for the company is worth roughly $400 billion on a standalone basis with this highly profitable segment poised to exceed $50 billion in revenues by FY20.”
Netflix Still On the Rise
And of course, we are getting to the competitors. Netflix is a name that often comes up at the top of the list of potential losers here. It’s the undisputed leader of premium streaming.
Everyone’s gunning for Netflix. The shares took a hit last summer, just because a Wall Street analyst predicted that Apple’s future video service could be ringing up $4.4 billion in annual revenue by 2025.
We already reported of how Walt Disney Co. completed its $71 billion acquisition of 21st Century Fox Inc.’s entertainments assets. Disney and Netflix stocks reacted in an unexpected way.
Things are never that cut-and-dried, and the fact, that Netflix shares are trading 7% higher over the past eight trading days since Apple’s media event was announced, matters. Apple’s arrival is important, but it’s not something Netflix investors need to be freaking out about at the moment.
Shares of Apple are climbing regarding the highly anticipated unveiling of its new streaming video service that hopes to challenge Amazon Prime, Netflix , and Disney. The climb is part of a larger 2019 comeback, which begs the question “is now the time to buy Apple stock?”
Apple, earlier this week, also showed off updated versions of its secondary hardware products, including a new iPad, iMac, and AirPods. The new iMac features faster Intel chips and AMD GPUs, while the AirPods boast “50% More Talk Time” and more.
However, Apple is also shifting its focus to its lucrative services segment. This segment includes services like Apple Music, Apple Pay, Appstore, and Licensing among others.
Let’s be real. Apple gave investors good reason to turn attention to the company’s services segment earlier this year when CEO Tim Cook told investors in a Jan. 2 letter to shareholders that its fiscal first-quarter revenue would be significantly below its initial guidance for the period. iPhone unit sales, particularly in China, failed to live up to expectations, Cook said.
If iPhone can’t deliver, Apple’s services business represents investors’ next-best option to drive the company’s next leg of growth. Services accounted for 15% of Apple’s trailing-12-month revenue, making it the company’s second-largest segment. In addition, the segment is growing fast, with trailing-12-month revenue up 27% year over year.
For Apple to keep up its robust growth in services, the tech giant is going to need to keep investing in its current service offerings while bringing to market new, compelling services.