How Goldman Sachs is advising its wealthiest clients
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Goldman Sachs lowered its price forecast for Apple TV+
Apple shares tumble on Friday after Goldman Sachs analysts cut corporation price forecast amid fears Apple TV + trial will hit revenues.
Goldman analyst Rod Hall cut his price target to $ 165 a share from the previous $ 187, arguing that the company’s free TV service would lower up front margins and hurt the group’s gross profit as well as earnings per share next year..
«Essentially, Apple’s accounting method shifts hardware revenue into services, even if customers don’t perceive themselves as paying for TV.+», – Hall wrote.
«While this may sound convenient for Apple’s service revenue line, it is equally inconvenient for obvious hardware ASPs as it does for high-quarter sales margins.», – analyst thinks.
Goldman does not blame Apple for miscalculations, but believes that the profitability of the hardware will suffer as a result of this free trial, which will cause negative reaction from investors..
Hall explained that Apple had previously used “very similar approach” to their accounting methods for the so-called “embedded services”, such as Apple Maps and its artificial assistant Siri. Goldman analyst expects TV + free trial revenues to add 25% to Apple’s gross margin contribution, resulting in lower product revenues “to a negative calculated EPS impact of 16%” for the first quarter of fiscal year 2020.
On the back of the news, Apple shares dropped 1.7% by mid-trading.