Apple is giving away one year free of the Apple TV Plus streaming service to customers who buy one of its devices starting in November — but the company insists the offer won’t have a “material impact” on earnings, contrary to a prediction from a prominent Wall Street analyst.
The company was responding to a downgrade of its stock by Goldman Sachs, which predicted the one-year-free Apple TV Plus offer would depress earnings per share for the December 2019 quarter by 16%.
Apple’s share fell as much as 2.7% Friday after Goldman Sachs cut its 12-month price target on Apple’s stock from $187 to $165 per share, citing the firm’s expectation that the free Apple TV Plus offer would have a “material negative impact” on earnings. The stock rebounded slightly after Apple’s statement, closing down 1.9% to $218.75 per share on Sept. 13.
In a research note, Goldman Sachs analyst Rod Hall said he expected Apple to account for the one-year free trial of Apple TV Plus as a discount of about $60 (which would be the retail cost of Apple TV Plus for one year) in the hardware segment.
“Effectively, Apple’s method of accounting moves revenue from hardware to services even though customers do not perceive themselves to be paying for [Apple] TV+,” Hall wrote in the note, released late Thursday. The analyst cited Apple’s previous accounting methods for services like Apple Maps and the Siri voice assistant, which are included with its hardware products.
Earlier this week, Apple announced that Apple TV Plus will launch Nov. 1 in over 100 countries and regions, priced at $4.99 per month (with a seven-day free trial) for existing customers and free for 12 months with the purchase of any iPhone, iPad, Apple TV, iPod touch or Mac.
Apple is premiering nine original shows on Apple TV Plus when the service launches, including “The Morning Show,” a drama starring and executive produced by Reese Witherspoon and Jennifer Aniston, and starring Steve Carell; “See,” a drama starring Jason Momoa and Alfre Woodard, set 600 years in the future after a virus has decimated humanity; and “For All Mankind,” an alternate-history series from Ronald D. Moore about the space race.