Apple’s services business is set to grow by 20% next year, boosted by its upcoming Apple TV+ streaming service, says Katy Huberty of Morgan Stanley, raising the price target for the iPhone manufacturer to $289.
CNBC reports that in a new investor note, Huberty says she is bullish on Apple TV+ growth, seeing success even if only a small fraction of the Apple users who gain a free year end up paying to subscribe.
Huberty predicts that Apple TV+ will grow into a $9 billion business by 2025, even though the service is facing increasing competition in the streaming market, and that’s assuming that only 1 in 10 Apple users subscribes to the service.
“With an attractive price point at $4.99/month, and wide initial distribution to the Apple installed base via the bundled free year offer, we estimate Apple TV+ can become a $9B revenue business with 136M paid subscribers by FY25, assuming just 1 in every 10 Apple user pays for the Service by FY25,”said Huberty.
Huberty says that for Apple TV+ to have a more material impact on its near term estimates, Morgan Stanley would have to assume that: “1) Apple TV+ production costs are significantly higher at the launch of the Service, and/or 2) more users redeem the Apple 12 month free offer with the purchase of a device.”
Morgan Stanley also raised its target price for AAPL stock from $247 to $289, as well as expectations that Apple’s 2020 5G-equipped iPhones will fuel a sales return “to growth as replacement cycles peak.”
Apple’s streaming television service will launch on November 1 in 100+ countries and regions. The service will carry a monthly fee of $4.99, and a 7-day trial will be available. Users that purchase a new iPhone, iPad, Apple TV, iPod touch, or Mac will receive a free one-year subscription. Up to six family members can share a single subscription via Family Sharing.