Apple Inc. (NASDAQ: AAPL) is scheduled to release its fiscal fourth-quarter financial results after the markets close on Wednesday. The consensus estimates are calling for $2.84 in earnings per share (EPS) and $62.99 billion in revenue. In the same period of last year, the tech giant said it had $2.91 in EPS and $62.9 billion in revenue.
The iPhone giant is getting closer to its official launch of Apple TV+ on November 1. In the meantime, Wall Street is gauging consumer appetite for another content provider, with Apple officially entering the ring with the likes of Netflix, Disney and Hulu. One key analyst has taken an in-depth look at the streaming services and how Apple will measure up.
Recently, Wedbush reiterated an Outperform rating on Apple and raised its price target to $265 from $245, implying upside of 15% from the most recent closing price of $230.09.
The boutique investment firm was quick to note:
It is a crucial time for Cupertino as it recently launched its trifecta of new smartphones with iPhone 11 strong out of the gates thus far and now looks to convert millions of Apple device users on to its streaming platform. Taking a step back we remind investors of the “show stopping” low price for Apple’s streaming TV service at $4.99 per month taking a major shot at its content competitors with Netflix front and center as clearly Cook & Co. are looking for market share coming out of the gates with this price point that we loudly applaud. In our opinion with an installed base of 900 million active iPhones worldwide we believe Apple has an opportunity to gain 100 million consumers on the streaming front in the next 3-4 years. We note that Apple is offering Apple TV+ free for a year with the purchase of an Apple device to help stimulate demand for its trifecta of smartphones and build loyalty on the services, which we believe is a smart move.
Separately, Wedbush believes that Apple has a compelling list of new shows coming out, as the firm believes it has committed about $6 billion annually to the original shows and movies to beef up its streaming content ambitions going forward. This is a significant step up from the $1 billion that originally was believed to be the annual budget as the company tries to keep pace in the content arms race.
Wedbush went on to say:
In our opinion the lower price points, potential content arsenal (through organic and M&A), and massive installed base could enable Apple to disrupt roughly 10% of Netflix’s target customer base within the next 12 to 18 months and along with Iger/Disney create a much more competitive pricing environment and market share landscape for the golden child Netflix going forward. We believe Apple’s goal here on this streaming endeavor is to be a major distribution platform for content and with 1.4 billion active iOS devices worldwide, with the theme of family and a safer viewing platform, Cupertino is trying to differentiate itself vs. competitors and flex its Apple brand muscles.
If Apple executes with minimal obstacles and aggressively acquires content, given the company’s massive installed base and unmatched brand loyalty it’s possible that it could reach the 100 million subscriber number in the medium term (three to four years) and that could translate into a $7 billion to $10 billion annual revenue stream over time for Apple and further cement its installed base and halo effect.
Excluding Wednesday’s move, Apple had outperformed the broad markets, with its stock up about 54% year to date. In the past 52 weeks, the stock was up closer to 12.5%.
A few other analysts weighed in on Apple ahead of the report as well:
- Merrill Lynch has a Buy rating with a $260 price target.
- Goldman Sachs has a Neutral rating with a $165 price target.
- Jefferies has a Buy rating with a $285 target price.
- Credit Suisse’s Buy rating comes with a $270 price target.
- Cascend Securities has a Buy rating and a $270 price target.
- UBS has a Buy rating with a $275 target price.
- Morgan Stanley rates it at Overweight with a $289 price target.
- Deutsche Bank has a Hold rating with a $230 target price.
- Raymond James has an Outperform rating with a $280 target.
Shares of Apple traded at $243.02 on Wednesday, in a 52-week range of $142.00 to $249.75. The consensus price target is $236.33.