Investing News

Apple disputed the negative call by Goldman Sachs on Friday, which hit the stock, taking issue with the firm’s negative characterization on how Apple would account for its new TV+ service.

Goldman said that the one-year free trial of the TV+ service would have a “material negative impact” on earnings by showing lower hardware profit margins. Goldman believes that this issue will send the stock significantly lower, so the firm cut its 12-month price target.

“We do not expect the introduction of Apple TV+, including the accounting treatment for the service, to have a material impact on our financial results,” the company said in a statement to CNBC.

Apple shares – which were down by 2.6% on Friday before the statement – rebounded slightly, to trade down 1.8%.

Goldman predicted a slide greater than 25% in the stock over the next 12 months. The firm cut its 12-month price target on the company to $165 from $187. The move made Goldman’s target the lowest of the major Wall Street banks, as well as the fifth lowest of all analysts who cover Apple, according to TipRanks.com.

The note was not accusing Apple of improper accounting. Instead, Goldman analyst Rod Hall believes that the company’s profit margins for hardware will suffer as a result of the TV+ free trial. Hall said this would result “in a negative calculated impact to EPS of 16%” for fiscal first quarter 2020.

“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.

Articles You May Like

3 Dividend Stocks to Buy for Under $10
Bond yields are surging, and the scary recession warning everyone was talking about has gone away
Stocks making the biggest moves after hours: SmileDirectClub, 2U Inc., Skyworks & more
Stocks making the biggest moves after hours: Roku, Qualcomm, Expedia & more
Friday’s Vital Data: Disney, Activision Blizzard and Roku

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.