Alex Cho

About the Author Alex Cho

Best tech/finance blogger on TipRanks. Alex Cho is ranked 7th among all financial bloggers, with a sector focus of technology stocks. The research he publishes captures the long-term growth potential of tech franchises, and market valuation. His research recommendations over the span of five-years has averaged into an annualized return of 19.3% across 392 ratings of which 66% were successful. Over his years of publishing, Alex Cho has been an indispensable source of information for an investment minded audience, which is why his lifetime viewership has exceeded ten million in total since 2012, across various media platforms. Furthermore, he’s frequently cited in various local business journals across the United States, and is frequently tagged with the “in-depth” designation on Google News for his public articles. The quality of his research is well known, and is well-respected which is why he’s frequently cited by other authors, journalists, bloggers and experts. Alex Cho was a former founding partner of Alexander & Cohen Capital Management, has worked as a consultant for mid-stage tech companies looking to raise capital or form an exit strategy, with the most recent consultation billed to a client that was generating revenue of $10 million+ in the web domain/registrar segment. Alex Cho is frequently invited to interview members of management at various Fortune 500 tech companies’ due to his outstanding media credentials, and credibility. Furthermore, he frequently attends various tech media events at the request of the event organizers. Alex Cho has a great relationship with Wall Street and Silicon Valley, as well. In the Venture Capital Space, he has sources that are inclusive of VC Partners, and independent research from PitchBook, Mercury Data, eMarketer, MergermarketGroup, and so forth. Anyone facing the public with investment related material needs quality sources, which should be inclusive of insights from Private Equity and various sell-side institutions and debt rating agencies as well (Standard & Poor’s, Fitch, & Moody’s). Alex Cho publishes with the support of Bank of America Merrill Lynch, Morgan Stanley Americas, Royal Bank of Canada Capital Markets, United Bank of Switzerland AG, Barclays Americas, Goldman Sachs, J.P. Morgan, Credit Suisse AG, PiperJaffray, Wedbush Securities, Oppenheimer & Co., Nomura Securities, BMO Capital Markets, Raymond James, Pacific Crest, SunTrust, Mizuho Securities, Deutsche Bank and Canaccord Genuity. Alex Cho attended ASU via the MAPP program with a 3.76 GPA in business-finance. The genius behind Cho has less to do with his academic accomplishments, but rather his ability to navigate, adapt, and improve the quality of his work through all the activities he has engaged. In the past year, Alex Cho has launched a new marketplace service referred to as Cho’s Investment Research. To learn more about this service, or to receive article notifications, be sure sure to subscribe. We provide frequent updates via our Blog Posts, which goes out to our subscribers.

Apple’s (AAPL) Streaming Video Buzz: Should You Buy the Hype?


Apple (AAPL) got a bid on Thursday, as it increased in value by nearly 4% which was driven by some optimistic commentary relating to its services business revenue. The service business offers the most potential for growth, which is why Apple’s management team has continued to shift the focus towards service revenue growth and not hardware revenue growth in the past couple fiscal years.

The hype was driven by expectations for a streaming video service that Apple will launch on March 25th, 2019. The event will announce the launch of an Apple Video streaming product, which would compete with companies like Netflix, Amazon Prime Instant Video, and so forth.

There’s no doubt that Apple could gain momentum in the streaming segment of the market given its installed base of users, but the amount of money they would have to invest into content might create some challenges with making immediate profits from the business unit in the immediate year or so.

That being the case, there’s some optimism among analysts, as there could be room for more video streaming providers in the market. Streaming video might not be as saturated of a market, assuming Apple can price its service similarly to its competitors and could offer an expansive and differentiated TV show and movie library. The company certainly does have the financial resources to build-up a decent sized video streaming offering, but it would also face competition from well-established players in the industry for those content rights.

Apple is expected to spend $1 Billion on content this year, which means Apple would need to amass 8 million subscribers this year (at $10/month or $120/month per subscriber) for revenue to match the content spend.

Some believe that Apple could ramp-up its subscriber base even quicker. Wedbush Analyst Daniel Ives mentioned in a note released to clients of the Investment Bank on March 31st, 2019:

If Apple executes with minimal speed bumps and aggressively acquires content, given the company’s massive installed base and unmatched brand loyalty we believe reaching 100 million subs in the medium term (3 to 5 years) is a realistic goal 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. For the stock, if Apple is successful with its latest streaming endeavor (which we believe they will be) and reaches some of these potential subs/revenues numbers annually we estimate, this will add roughly $15 per share to our SOTP valuation on Apple and translate to a $215 per share valuation for the name. We maintain our OUTPERFORM rating while raising our price target to $215 from $200. (To watch Ives’ track record, click here)

There are a lot of moving parts to these expectations, but the addition of $10 Billion in annual subscriber revenue would add $15 to the stock price based on Wedbush estimates. Of course, a lot could change in the next five-ten years, as Apple has yet to launch its streaming video product, and it did take Netflix a lot longer to reach its first 100 million subscribers (roughly 10-years from the launch of video streaming in January 2007 until April 2017 when it announced its 100 millionth subscriber). The growth ramp of Netflix was relatively incredible, and to anticipate Apple to reach 100 million subscribers within five-years might be aggressive though it’s not necessarily impossible.

Apple would need to make strategic acquisitions of entire movie production companies, which would increase its access to pre-existing tentpole movie franchises. They need some high-quality movie licenses to address its audience with new content on a regular enough basis. Assuming they have a great content offering, and they were to incorporate acquisitions into its strategy it might give them a large enough of a show/movie viewing library to compete with Netflix at 139 million subscribers, which has both the financial resources and growth runway to keep adding to its already large content library.

Even so, Apple could look at various studios like a24, Lionsgate, Sony Pictures, CBS/Viacom, and MGM according to Daniel Ives from Wedbush Securities. The bigger opportunity could be the movie or broadcast studios, as they could get acquired by either Apple or Amazon, maybe even Netflix at this point.

The incremental value to shareholders from the launch of an Apple branded streaming service seems modest, as an additional $10B in annual revenue barely moves the needle for Apple’s topline at $250B to $260B forecasted sales in FY’19 and FY’20, but it at least fuels the service revenue growth story. Until there’s a big jump in hardware sales any attempts to expand the service business would add optimism.

But, even then, the bigger opportunity is the potential M&A activity for movie studios, which would be bought at a premium. Investing into some of the smaller movie studios on industry consolidation could be an alternative investment opportunity as well.

 

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