Goldman Sachs cuts Apple, predicts 26% stock drop on TV+ accounting

 POINTS
  • Goldman Sachs cut its price target for Apple’s stock to $165 a share from $187, making the firm’s expectation for Apple the lowest of the major Wall Street banks, according to TipRanks.com.
  • The firm predicts 26% downside for the stock because of a “material negative impact” on earnings for the accounting method the iPhone maker will use for an Apple TV+ trial, Goldman analyst Rod Hall said in a note.
  • “Effectively, Apple’s method of accounting moves revenue from hardware to Services even though customers do not perceive themselves to be paying for TV+,” Hall said.

Goldman Sachs just significantly slashed its price target for Apple, predicting 26% downside for the shares because of a “material negative impact” on earnings for the accounting method the iPhone maker will use for an Apple TV+ trial.

“We believe that Apple plans to account for its 1-year trial for TV+ as a ~$60 discount to a combined hardware and services bundle,” wrote Goldman analyst Rod Hall, in a note.

“Effectively, Apple’s method of accounting moves revenue from hardware to Services even though customers do not perceive themselves to be paying for TV+. Though this might appear convenient for Apple’s services revenue line it is equally inconvenient for both apparent hardware ASPs and margins in high sales quarters like the upcoming FQ1′20 to December,” Hall added.

Apple shares fell as much as 2.6% in trading Friday after the note. Goldman cut its 12-month price target on the company to $165 from $187. The firm has a neutral rating on Apple’s stock.

www.cnbc.com/2019/09/13/goldman-sachs-just-dramatically-cut-its-outlook-for-apple-predicts-26percent-downside.html

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