Apple subscription TV plan could help push services to 20% of company's earnings, Morgan Stanley say

Posted:
in AAPL Investors edited March 2015
Apple's growing services business, including the App Store and Apple Pay, could account for 20 percent of its earnings in the next two years, or perhaps even sooner if the company launches its rumored subscription TV service this fall, one analyst believes.


Apple CEO Tim Cook announces new Apple TV pricing at this month's "Spring Forward" event.


Katy Huberty of Morgan Stanley issued a note to investors this week, a copy of which was provided to AppleInsider, in which she reacted to recent reports alleging that Apple is looking to launch an online TV service with support from major content providers this fall. Given the flurry of recent news, Huberty now believes that an Apple TV service is more likely than in years past.

She said the moves made earlier this month, including a price cut on the Apple TV hardware to $69, and the announcement of an exclusive launch deal with HBO Now, positions Apple well, if content deals can be hammered out.

In the U.S. alone, Huberty sees the potential for Apple to add 15 million subscribers to its TV service, which would account for 8 percent of the company's install base. Doing so with 30 percent operating margins could add 2 percent to the company's revenue, she said.




Morgan Stanley recently conducted a survey that found 20 percent of pay TV subscribers plan to cut the cord and ditch cable for television in the next 12 months. The highest age group intending to cancel is ages 18 through 29, though consumers ages 30 to 44, as well as those making more than $75,000 a year, also saw their intent grow from the previous year.

"These data points suggest that cord cutting should no longer be viewed as a phenomenon taking place primarily among younger and lower income cohorts," she said.

Huberty believes that an Apple television service, along with the iTunes Store, App Store, Apple Pay, and Beats Music could drive the "Services" category of Apple's products to 20 percent of the company's total in the next few years.




To her, the "Services" category is key to her platform thesis, in which she believes shares of AAPL should be trading compared to platform peers, with an 18-to-19-times price-to-earnings ratio. Her thesis cites Apple's pricing premium, everyday consumer usage of its products and services, recurring revenue, and total addressable market expansion opportunities.

Morgan Stanley has maintained its "overweight" rating for AAPL stock, with a price target of $160.
«1

Comments

  • Reply 1 of 39
    danielswdanielsw Posts: 905member
    Quote:

    Originally Posted by sog35 View Post

     

    One Trick Pony?  My ASS.

     

    iPhone Company?  My ASS.




    Helluva "walled garden" this is turning into, I say! Welcome to Apple World!

     

    I like it here.

  • Reply 2 of 39
    irelandireland Posts: 17,552member
    Stanley smoking crack again.
  • Reply 3 of 39
    rob53rob53 Posts: 2,007member

    I bet part of that 40% sleeping per day is done at work. Who sleeps 9.6 hrs per day? Definitely not those watching 2.88 hrs of TV. And only 3.12 hrs/day working. Who did they interview?

  • Reply 4 of 39
    evilutionevilution Posts: 1,349member

    I don't think normal cable companies make 20% of Apple's yearly earnings.

     

    I also have issues with 100% graphs. They make it look as though particular areas are shrinking whereas the area actually makes more money than before, it just makes up a lower % because of the growth of other areas.

  • Reply 5 of 39
    solipsismysolipsismy Posts: 5,099member
    rob53 wrote: »
    I bet part of that 40% sleeping per day is done at work. Who sleeps 9.6 hrs per day? Definitely not those watching 2.88 hrs of TV. And only 3.12 hrs/day working. Who did they interview?

    It may not refer specifically to the sleeping, but rather to the entire process of sleeping and waking. If one gets an actual 8 hours of sleep that's only 1.6 hours left for both getting ready for bed, attempting to fall asleep (which isn't a fast process for most people since we tend to have TVs and computers chatting with us until the moment we fall asleep), getting out of bed, and potentially getting ready in the morning.
  • Reply 6 of 39
    macapfelmacapfel Posts: 503member
    Is Leisure/Social = Facebook?
  • Reply 7 of 39
    maestro64maestro64 Posts: 4,485member
    This assume that Katy Huberty of Morgan Stanley has even an oz of a clue what the deal will be between Apple and the content providers. It appears that Apple is not even taking a cut, they my only make money on the hardware in this case and to extrapolate that into % of apple revenue it pure speculation

    We all know Apple pretty well and we can see when these estimated are pure BS, imagine what they are saying about companies which majority to the investment world has not idea what a the company is doing. You wonder why companies stocks rise and fall like that do.

    The only things I tend to agree is that Apple look more like a service company than hardware/software company. However I would argue that Apple is more of an experience company than anything else. They are the Disney of the tech world. They use services, hardware and software to provide a overall experience. This is why wall street has issue with Apple and Disney they do not know how to Value a company which deliveries an experience
  • Reply 8 of 39
    macapfelmacapfel Posts: 503member
    Quote:

    Originally Posted by rob53 View Post

     

    I bet part of that 40% sleeping per day is done at work. Who sleeps 9.6 hrs per day? Definitely not those watching 2.88 hrs of TV. And only 3.12 hrs/day working. Who did they interview?




    Maybe they included retired people and teens?

  • Reply 9 of 39
    MacProMacPro Posts: 18,155member
    sog35 wrote: »
    One Trick Pony?  My ASS.

    iPhone Company?  My ASS.

    Right but Apple can't innovate ... /s :D
  • Reply 10 of 39
    MacProMacPro Posts: 18,155member
    macapfel wrote: »

    Maybe they included retired people and teens?

    Are you saying Congress is made up of retired people and teens? ;)
  • Reply 11 of 39
    macapfelmacapfel Posts: 503member
    Quote:

    Originally Posted by digitalclips View Post





    Are you saying Congress is made up of retired people and teens? image



    If you look at the age of congress men, at least, yes, there are many that could/should retire.

  • Reply 12 of 39
    maestro64maestro64 Posts: 4,485member
    evilution wrote: »
    I don't think normal cable companies make 20% of Apple's yearly earnings.

    I also have issues with 100% graphs. They make it look as though particular areas are shrinking whereas the area actually makes more money than before, it just makes up a lower % because of the growth of other areas.

    The Cable industry (or media distribution industry which is more than just the cable company) is large than people think. I am starting to think that Apple solution to the content providers it going to cut out lots of middle men. it allows content owner to do their own deal with advertisers and such and not have to share revenue with everyone in the value path that exist today. If what we heard that Apple allow content owners control over how they advertise and such and Apple is only providing the path to consumers this may brake the backs of the cable operators. The net neutrality was the first domino that had to fall to make the apple plan work. Now that operators of the internet can not block or throttle services it paves the way for people to get their content how they like it.
  • Reply 13 of 39
    kent909kent909 Posts: 708member
    Quote:

    Originally Posted by rob53 View Post

     

    I bet part of that 40% sleeping per day is done at work. Who sleeps 9.6 hrs per day? Definitely not those watching 2.88 hrs of TV. And only 3.12 hrs/day working. Who did they interview?




    Good observations. These people manage lots of money. Kinda scary. What could possibly go wrong.

  • Reply 14 of 39
    pmzpmz Posts: 3,433member

    Going to have to wait and see what Apple comes up with. I have confidence in them, but the rumors about an all-you-can-eat subscription plan for AppleTV have me very disappointed. This is not what I have been expecting after all this time of negotiating, and trying to bring the right experience to users.

  • Reply 15 of 39
    It concerns me that Apple is becoming increasingly insular with its services.

    Apple TV is dead in the UK due to the lack of broadcasters. The HBO deal is irrelevant to the UK.

    iTunes Radio doesn't exist.

    Apple Pay doesn't exist. Supposedly coming this year, but that's what they said about iTunes Radio in 2012.
  • Reply 16 of 39
    robin huberrobin huber Posts: 3,247member
    One man's "walled garden" is another man's well-oiled machine.

    I'm looking forward to changing channels on my wrist.
  • Reply 17 of 39
    robin huberrobin huber Posts: 3,247member
    It concerns me that Apple is becoming increasingly insular with its services.

    Apple TV is dead in the UK due to the lack of broadcasters. The HBO deal is irrelevant to the UK.

    iTunes Radio doesn't exist.

    Apple Pay doesn't exist. Supposedly coming this year, but that's what they said about iTunes Radio in 2012.

    Think of it this way, we Yanks are just guinea pigs for the perfected devices and services you will get. ????
  • Reply 18 of 39
    aaronjaaronj Posts: 1,595member

    1) I hope she's right.

     

    2) I'm glad someone else doesn't like these types of graphs.  They always confuse the hell out of me.  

     

    3) Damn, she's cute.  (Not really relevant ... just an observation. :) )

  • Reply 19 of 39

    I doubt anything Apple does in services is going to make the stock budge.  Wall Street has little faith in Apple and Tim Cook in terms of future growth for the company.  If analysts had announced Amazon could increase revenue by 20% by addition of a new service the stock would have gone up a couple percent because investors would want to get on board as soon as possible.  With Apple, anything the company does is met with doubt and negative speculation that whatever Apple is planning not going to move the needle.  Apple Pay, Beats streaming service, AppleWatch, AppleTV streaming service... None of those are supposedly going to help Apple very much, according to Wall Street's opinion.  Apple is seen only as the iPhone company and that's all Wall Street is concerned with.  Apple would seem to have a really strong opportunity to blow past Amazon and Netflix, but Wall Street doesn't even acknowledge that possibility.  It's pretty sad to see the lack of faith Wall Street has in Apple.

  • Reply 20 of 39
    sog35 wrote: »
    It concerns me that Apple is becoming increasingly insular with its services.


    Apple TV is dead in the UK due to the lack of broadcasters. The HBO deal is irrelevant to the UK.


    iTunes Radio doesn't exist.


    Apple Pay doesn't exist. Supposedly coming this year, but that's what they said about iTunes Radio in 2012.

    do i care? 

    I guess you do, as you read and responded to my post.

    Thank you for your concern; it's truly appreciated.
Sign In or Register to comment.