Morgan Stanley Predicts Apple TV+ Will Boost Apple’s Services By 20 Pct

Morgan Stanley analyst Katy Huberty has predicted that Apple TV+, the new streaming service from Apple, will be highly successful and help Apple’s services offerings grow 20 percent next year, CNBC reported.

The service will cost $4.99 a month and debut in November. Subscribers will get access to TV shows and movies provided by Apple, and customers who purchase a new iPhone or iPad will get the service free for a year.

The prediction includes iPhone sales, which are predicted to jump as “growth as replacement cycles peak.” Morgan Stanley increased its price target for shares in the company from $247 to $289, which is a rise of 17 percent.

“With an attractive price point at $4.99/month, and wide initial distribution to the Apple installed base via the bundled free year offer, we estimate Apple TV+ can become a $9 [billion] revenue business with 136 [million] paid subscribers by FY25, assuming just [one] in every 10 Apple [users pay] for the Service by FY25,” Huberty wrote.

One concern shared by investors is how Apple is going to pay for the free subscriptions. Apple said: “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.”

Huberty agreed with that sentiment.

“For Apple TV+ to have a more material impact to our near term estimates, we’d have to assume 1) Apple TV+ production costs are significantly higher at the launch of the Service, and/or 2) more users redeem the Apple 12 month free offer with the purchase of a device,” Huberty wrote. “With a growing list of catalysts, including accelerating Services growth and multiple expansion ahead of the 5G iPhone launch, and an attractive 8 [percent] total dividend [and] buyback yield, we continue to view Apple as our top pick into 2020.”