Goldman Sachs early on Friday cut its target price for Apple (AAPL) stock from $187 a share to $165 a share. Goldman’s Rod Hall claimed Apple’s plan to give free access to its upcoming Apple TV+ streaming service will cause a “material negative impact” on the Cupertino firm’s earnings due to how the accounting for the service will work.
Hall said Apple would account for the one-year free trial to buyers of an iPhone, iPad, iPod touch, Apple TV, or Mac as a combined hardware and services bundle discount, which would lead to lower hardware profit margins.
“We believe that Apple plans to account for its 1-year trial for TV+ as a ~$60 discount to a combined hardware and services bundle,” wrote Goldman analyst Rod Hall, in a note.
“Effectively, Apple’s method of accounting moves revenue from hardware to Services even though customers do not perceive themselves to be paying for TV+. Though this might appear convenient for Apple’s services revenue line it is equally inconvenient for both apparent hardware ASPs and margins in high sales quarters like the upcoming FQ1′20 to December,” Hall added.
However, Apple issued a statement later in the day disputing that claim, saying it doesn’t expect the Apple TV+ introduction to have a negative impact on its financial results.
“We do not expect the introduction of Apple TV+, including the accounting treatment for the service, to have a material impact on our financial results,” the company said in a statement to CNBC.
Users that do not purchase a new Apple device will pay $4.99 per month for family access to Apple TV+. The streaming service will launch on Friday, November 1.