Analyst Philip Elmer-DeWitt shared a note to investors from J.P. Morgan’s Samik Chatterjee offering a prediction for Apple’s soon to be unveiled streaming television service.
Chatterjee says that while Monday’s premiere of the service won’t send AAPL stock higher, over time Apple could settle into the number two spot behind Netflix.
With an abundance of predictions on the announcement already widely publicized in the press, we believe the event itself will not be a catalyst. However, as we look at the opportunity for the announcement to make a material impact on earnings in the future, we are primarily focused on long-term drivers that could set up the video service to establish itself as a strong competitor to Netflix over time…
Our focus relative to the announcement will be less on the original content shows that Apple is looking to launch and preview at the event, which as per news reports are expected to be closer to 20+ — small relative to the ~700 original shows that Netflix launched in 2018. We see the value in Apple’s attempt to differentiate with original content in the long-run, however, given the small number of original content programming relative to the industry leader (Netflix) and traditional media companies (HBO, Disney), we do not expect original content will be a significant differentiator and driver of subscriptions in the first few years of the ramp.
Chatterjee says the focus should be on “Apple’s ability to position itself as an aggregator of content from different content providers,” including not only the larger content providers, but also the smaller services providing more localized content.
Chatterjee sees larger players as being reluctant to join Apple’s service at the start, but sees smaller players as being more open to offering their content on the platform to take advantage of the iOS device installed base.
J.P. Morgan gives AAPL an overweight rating, with a $228 price target.