Apple (AAPL) will need to up its game to gain traction in an increasingly crowded streaming space, so says Wedbush analyst Daniel Ives in a recent note to clients.
The streaming space has been heating up recently with a number of big names vying to take a chunk out of market leader Netflix’s dominance. NBCUniversal’s Peacock and HBO Max are among the services launching in the months ahead, but one player’s recent foray into the space has already released viewing figures which Ives maintains are “jaw dropping.” Disney expected its newly launched streaming service Disney+ to reach between 60 and 90 million subs by 2024, but a recent update revealed the new service has already hit 50 million subs, roughly doubling since the previous update in early February.
COVID-19’s impact has provided a boost to streaming services, with shelter in place measures providing a spike to viewing figures. The tech giant from Cupertino is hoping to gain traction in the sector, too. Apple’s customer base of active iPhone accounts numbers approximately 925 million, of which Ives believes Apple has an opportunity to gain 100 million streaming subscribers over the next 3 to 4 years.
Ives estimates Apple TV+ currently has between 30 to 40 million subscribers, although to help boost demand, the company is giving away a free year’s subscription with every new purchase of an Apple device, so the majority aren’t yet paying for the service.
Apple TV+ has some promising content (The Morning Show, For All Mankind) and the company has committed $6 Billion to spend on content to boost its library. Additionally, there is the possibility of a M&A with a large entertainment player (MGM, Lionsgate, Sony Pictures, A24) to “catapult its much-needed content library.” But it will seriously need to up its game if it is to compete with a player such as Disney, with its unmatched content library spanning the Star Wars and Marvel franchises, and its rich history of animated classics.
Ives said, “This is a fork in the road situation for Apple’s streaming endeavors as with Disney firing on all cylinders, Peacock and HBO launching around the corner with impressive content, now is the time for Cook & Co. to attract subscribers, although lack of content (no new projects can roll out in light of the pandemic) remains the issue to keep them as a paying sub, with content/studios acquisitions potentially now in the cards for Apple to fill this gaping hole.”
All in all, Ives maintains an Outperform on Apple shares along with a $335 price target. From current levels, the upside potential stands at 23%. (To watch Ives’ track record, click here)
It appears consensus sentiment matches well with Ives’ bullish stance, with TipRanks analytics showing AAPL as a Buy. Based on 26 analysts polled in the last 3 months, 26 rate AAPL a “buy” stock, 7 maintain a “hold,” while 2 issue a “sell” on the stock. The 12-month average price target stands at $308.31, marking nearly 13% upside from where the stock is currently trading. (See Apple stock analysis on TipRanks)
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