Why The Apple One Mega-Bundle Is A 'Clever Marketing Decision'

After months of speculation, Apple Inc. AAPL unveiled its Apple One subscription bundle at its "Time Flies" event Tuesday.

The Apple Analyst: Needham's Laura Martin maintained a Buy rating on Apple and increased the price target from $112.50 to $140.

The Apple Takeaways: Wall Street often underestimates the value of "clever marketing decisions" like the Apple One mega-bundle, Martin said in a Wednesday note.

The Apple One subscription bundle includes Apple Music, TV+, Arcade and 50GB of cloud storage for $15 per month per person.

A $20-per-month payment covering the base package plus 150GB more in iCloud storage and the new Fitness+ service and is meant for a family with up to six members, the analyst said. 

A Premier plan priced at $30 per month adds Apple News+ and 2TB of cloud storage to the previous tier, she said.

The plan is $25 cheaper per month than buying each service individually, Martin said 

Subscribers get a 3% monthly rebate if they pay through Apple Card, the analyst said. 

"In every new device, Apple Silicon drives more differentiated attributes, which improves on-ramps into AAPL's ecosystem and elevates its pricing power."  

The new Fitness+ service and the Apple One mega-bundle should help grow Services revenues faster, she said.

Needham sees Services as driving upside valuation for Apple in three ways: making the company's ecosystem stickier, thereby reducing churn; increasing the lifetime value of the company's 950 million installed base of customers; and supercharging free cash flow growth.

Services carry a 67% gross margin compared to a 30% margin for products, Martin said. 

AAPL Price Action: Apple shares were trading down 0.98% at $114.41 at last check Wednesday. 

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Photo courtesy of Apple.