Apple's Stock Dips Lower After Goldman Sachs Lowers Price Target To $165

Apple Inc. AAPL expansion into streaming video could have a "material negative impact" on earnings.

The Analyst

Goldman Sachs analyst Rod Hall maintains a Neutral rating on Apple with a price target lowered from $187 to $165.

The Thesis

Apple is marketing its new streaming video service Apple TV+ with a free one-year trial. While Apple's service costs $4.99 a month, the company will account for the trial as a $60 discount to a combined hardware and services bundle, CNBC quoted Hall as saying in a note.

Hall said Apple's accounting method shifts revenue from hardware to Services even if customers don't perceive themselves as paying for the streaming video service. This could give an advantage to Apple's services revenue line, but it's "equally inconvenient" for hardware average selling prices and margins high sales quarters, especially the December-ending period.

Apple's accounting method is in no way improper and the company has taken a "very similar approach" in the past. Nevertheless, the math behind the accounting method points to a potential negative 7% impact on fiscal first quarter and full year 2020 average selling prices.

Hall's revised price target is now the lowest forecast of all major Wall Street banks and the fifth lowest of all analysts who cover Apple's stock, according to TipRanks.

Price Action

Shares of Apple were trading lower by 1.2% Friday at $220.30.

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