Apple Says TV Plus Pricing Won’t Have a Negative Effect on Profits, Rebutting a Goldman Analyst
Apple said a new video service won’t have a material impact on its financial results, seeking to counter research from a Goldman Sachs analyst who cut his share price target on concern that aggressive pricing of the TV+ offering will trim profit.
Earlier this week, Apple outlined a strategy that involved lower prices on several devices and services, including a monthly cost of $4.99 for TV+. It will also be free for one year with purchases of new Apple devices. This is relatively rare for a company that has historically charged premium prices to support healthy profit margins.
Rod Hall, the Goldman Sachs analyst who covers Apple, cut his price target on Apple shares to $165 from $187, saying the company’s plan to offer a trial period for TV+ was “likely to have a material negative impact” on average selling prices and earnings per share.
“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,” Apple said in an email.
The stock jumped after the statement, trimming losses from earlier in the day. It traded down 1.8% at $219 at 2:56 p.m. in New York.
The TV+ service is entering a crowded video-streaming field that already includes Netflix, Amazon, Hulu, and AT&T’s HBO. In November, Walt Disney Co. plans to launch a Disney+ streaming service, with a giant catalog of titles, for $6.99 a month. Netflix’s entry-level subscription is $8.99 a month in the U.S.
Apple, which doesn’t currently have a back catalog of content for TV+, announced the $4.99-a-month pricing on Tuesday, sparking a rally in its shares and declines in Netflix and Disney stock. In India, the TV+ service will be 99 rupees ($1.40) a month.
More must-read stories from Fortune:
—Netflix killer? Here’s what analysts say about Apple TV+
—WeWork’s latest idea to save its troubled IPO? Major governance changes
—‘Skype mafia’ backs A.I. startup automating contract negotiations
—Jingles all the way: Sonic branding is helping voice computing companies get heard
—In breakthrough, company uses quantum physics to protect data over telecom networks
Catch up with Data Sheet, Fortune's daily digest on the business of tech.