Apple Services privacy praised, but lack of detail on new offerings confounding analysts

Posted:
in AAPL Investors
More analysts have passed judgment on the new services Apple launched during Monday's "It's show time" event, with Macquarie and UBS both highlighting the relative lack of surprises from what was speculated in the time before the event took place.

Apple's Wyatt Mitchell demonstrates Apple News+
Apple's Wyatt Mitchell demonstrates Apple News+


In investor notes seen by AppleInsider, both UBS and Macquarie offer the view Apple is trying to push revenue through its Services business. For Macquarie, the family sharing across services "highlight Apple's effort to get everyone in the same ecosystem," while UBS believe the event "represents a key step in monetizing its vast consumer relationships."

The main highlight of the event, Apple TV+, was as UBS expected, though the lack of pricing information "made it a little uninteresting."The quality of content will be key to its success, though a fall launch suggests to the analysts it's not quite ready for consumption.

"Execution and the pricing structure for Apple TV+ are key questions" suggests UBS, pointing out Apple Music grew to over 50 million subscribers in 3.5 years, while Netflix grew 6 million a year for the last six years in the United States alone. "The point is that good content can really be monetized and we think there is certainly room at the table for Apple," the analysts state.

Macquarie found Apple TV+ was "as expected," but posited that if Apple had between 10 million and 40 million subscribers, Apple TV+ would represent between 2 percent and 11 percent of the full year 2021's revenues, based on pricing of between $9.99 and $14.99 per month.

Apple News+ was just as unsurprising to both sets of analysts, though UBS considers the magazine subscription to be "more interesting" than video for the moment. To Macquarie, Apple News+ could form between 2 percent and 5 percent of fully year 2021 revenues if 10 million to 25 million people subscribed.




Little was offered about Apple Arcade by UBS, except it was "somewhat surprising" to see, and "may attract some new customers." Macquarie reckons it will contribute between 1 percent and 2 percent of 2021's revenues on a subscriber base of 5 million to 10 million users and a $9.99 subscription.

Apple Card, the company's entry to the credit card market, may make Apple Pay and Apple itself "more part of the consumers' daily life and increase stickiness of the ecosystem," UBS believes, though it "may not be material contributors to revenue."

Macquarie's Goldman Sachs analyst David Konrad suggests that, while the two brands are powerful and Apple Card is certainly competitive, "we've already seen similar products in the marketplace and may not be different enough to gain meaningful market share in an extremely competitive environment." While it is interesting, Apple Card won't be a significant contributor to Apple for the "next few years" in Macquarie's estimation.

In its note, Macquarie also highlights how Apple is continuing to preserve the privacy of its customers, with a "push back against advertising." The applause during sections announcing no advertising for video, privacy for Apple Card data, and the inability for advertisers to track Apple News readers was certainly noticed by the analysts.

UBS and Macquarie's notes follow similar advisements to investors from JP Morgan and Cowen, which suggested Apple could have gone further in providing detail about its upcoming Apple TV+ service.

For its valuation, UBS puts Apple at a price target of $215. Macquarie however, reiterates its "neutral" position on the stock with no changes to earnings or its 12-month target price of $149, well below where it ended at the close of business after the event on Monday.

Comments

  • Reply 1 of 12
    Want more information on Apple News ?
    Join now!  ...and get all the info that you need first hand.  
    It's awesome.

    It does not make sense for Apple to provide all the nitty gritty details about all the services because some are still being negotiated and too much details will only give the competitors a head start for copying the platform.

    repressthiscurtis hannahwatto_cobra
  • Reply 2 of 12
    bloggerblogbloggerblog Posts: 1,853member
    Sign me up if it's $29.95 for all Apple services including 200GB iCloud storage.

    edited March 26 applesnorangesrepressthiswatto_cobra
  • Reply 3 of 12
    rob53rob53 Posts: 2,051member
    Why should we even care what analysts have to say? They simply want to know things so they can manipulate the stock more than they already do. We didn't get costs for the services that aren't available yet. Duh! That makes sense because Apple isn't finished developing them yet. The only thing that worried/upset me was the inclusion of only two major newspapers in News+. That should worried the analysts. Of course, newspapers charge as much of more for their digital subscriptions than they overcharged for their paper ones so the $10/mo pays for some of the two newspapers and you get 100+ magazine subscriptions for free. Talk about a fantastic deal--one that nobody really is talking about (except Apple in their presentation when they said something like $8K in subscription costs).

    Sign me up if it's $29.95 for all Apple services including 200GB iCloud storage.

    Yea, it's going to be interesting if Apple comes up with a bundle because I could see mine making $100/mo quite easily.

    Apple Music $14.95
    200GB iCloud storage $2.95 (would like 1TB at this price)
    News+ $9.99
    tv+ (want local channels streamed without getting Hulu or similar, don't have Comcast anymore so Apple needs to get rid of cable/satellite subscription requirements)
    Arcade
    (next Apple thing)
    gilly33repressthiscurtis hannahwatto_cobra
  • Reply 4 of 12
    Sign me up if it's $29.95 for all Apple services including 200GB iCloud storage.

    Actually 30 bucks will take you a long way. Start with Apple News for 10 bucks. 10 bucks for iCloud  and 10 bucks for the basic AppleTV+ including the new Apple productions. 

    It it is better to keep them uncoupled and inexpensive to offer flexibility for different people.
    People tend to frown at all or nothing bundles that don’t fit their needs. 
    edited March 26 watto_cobra
  • Reply 5 of 12
    They're upset that the prices weren't mentioned because all they really know how to do is compare prices, i.e., "it's more than service X, it might fail" or "it's less than service Y, it could be a hit". 
    repressthiswatto_cobra
  • Reply 6 of 12
    Analysts are easily confounded. Period. 
    repressthiswatto_cobra
  • Reply 7 of 12
    LatkoLatko Posts: 398member
    This analyst behavior is exactly what Tim wants (and what makes FAANG companies succeed): No quest for costs or break-even. Only concentrating at the % of gross turnover. Heavy cross-subsidization (staffing, offices, licenses, server, bandwidth) by the holding so Tim can obscure net results and call every service a success anyway. Which is the self-containing plot: everything is being financied by share price / shareholder incentive, fed by that success-story. If that would stall, for whatever reason, Apple will stall. Stall bigtime.
    edited March 26
  • Reply 8 of 12
    sdw2001sdw2001 Posts: 17,038member
    They are't the only ones.  We have Apple News+ at $9.99.   We have Apple TV+, no pricing announced.  We have Apple Music at $9.99 a month.   We have iCloud which costs $.99 to $9.99 a month.    We have Apple Arcade with no pricing.  

    Now, add to this:  Most people have Netflix, which is now $12.99 a month.   Many have Prime, which is $12.99 a month or $119 a year.  Some have Spotify or other services.  Many have cable/fiber internet, which is $50-75 a month.  Many have cable, which is another $100 a month in many cases.  

    Apple needs to bundle this stuff.  And they better do Apple TV+ right, because launching without an extensive library will be a disaster.   
    watto_cobra
  • Reply 9 of 12
    sdw2001 said:
    They are't the only ones.  We have Apple News+ at $9.99.   We have Apple TV+, no pricing announced.  We have Apple Music at $9.99 a month.   We have iCloud which costs $.99 to $9.99 a month.    We have Apple Arcade with no pricing.  

    Now, add to this:  Most people have Netflix, which is now $12.99 a month.   Many have Prime, which is $12.99 a month or $119 a year.  Some have Spotify or other services.  Many have cable/fiber internet, which is $50-75 a month.  Many have cable, which is another $100 a month in many cases.  

    Apple needs to bundle this stuff.  And they better do Apple TV+ right, because launching without an extensive library will be a disaster.   
    Generally speaking the idea is people have cable or Prime+Netflix+maybe Spotify/Hulu. It would be nice if Apple included Apple TV+ and Music, possibly iCloud Storage and the other services announced yesterday for one bundle, but this is Apple here, odds are they won't. People vary based off their scenarios and outside of free iCloud storage upgrade with any service, wouldn't meet everyones expectations.
  • Reply 10 of 12
    technotechno Posts: 704member
    Sign me up if it's $29.95 for all Apple services including 200GB iCloud storage.

    I have been struggling to figure out what services I am willing to pay for and how much. I actually had not thought of an all inclusive bundle. Imagine. All of Apple's services (Apple Music Family plan, max iCloud storage, Apple TV+, News+, etc) for one price. That is something I would go for, even if it is more than I am willing to pay for individual services. The mind is a tricky beast.
    edited March 26 watto_cobra
  • Reply 11 of 12
    sdw2001sdw2001 Posts: 17,038member
    techno said:
    Sign me up if it's $29.95 for all Apple services including 200GB iCloud storage.

    I have been struggling to figure out what services I am willing to pay for and how much. I actually had not thought of an all inclusive bundle. Imagine. All of Apple's services (Apple Music Family plan, max iCloud storage, Apple TV+, News+, etc) for one price. That is something I would go for, even if it is more than I am willing to pay for individual services. The mind is a tricky beast.

    I feel the same way.  Right now the only thing I have from Apple is 200GB iCloud.  I don't even do Apple music (and I'm a music teacher).  There is no way I'm buying News+...that's a joke.  People don't want to pay for news.  And Apple TV+?  I really don't think so.  They would need an extensive library of things I can't get on Netflix or Prime.  Or maybe a certain amount of free movie downloads.  Netflix invests $10 billion a year in content and has built their streaming service over a decade.  Good luck with that, Apple.  And Arcade?  Eh, who knows.  I play a few games that are mostly free.  I doubt I'll partake.  

    But I do think this can be successful.  Let's say they bundle Apple Music, iCloud, and Apple TV+ and News+ for $29.95 a month.  And let's say the TV actually has a good lineup of channels in addition to streaming content.  Maybe.  
    watto_cobra
  • Reply 12 of 12
    badmonkbadmonk Posts: 800member
    Once again the cycle repeats—

    Step 1- Apple makes an announcement 

    Step 2- Analysts are underwhelmed and don’t understand it

    Step 3 - Apple plays the long game

    Step 4 - Apple reaps profits.

    Step 5 - Everyone copies the services with little alteration (watch credit card companies scramble first here)

    Step 6 - The analysts then begin a chorus of “Apple can’t innovate, is tired, etc”

    Step 7 - Repeat
    watto_cobra
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