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Will Apple Forever Change Cable?

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Apple Inc. (NASDAQ: AAPL) is inching further into the television industry. In addition to the Apple TV, the technology giant is in talks with media companies to create a service that live streams channel bundles onto iOS devices without requiring a cable package. The service is similar to DISH Network Corp (NASDAQ: DISH)'s Sling TV, which streams major cable channels.

This news comes just weeks after the technology giant announced a deal with HBO in which Apple gained exclusivity for HBO Now; a stand-alone service to watch HBO without a cable package.

Apple is in negotiations with a handful of media companies such as Walt Disney Co (NYSE: DIS), CBS Corporation (NYSE: CBS), and Twenty-First Century Fox Inc (NASDAQ: FOXA). Apple will "bundle" the channels, offering a more efficient package to people who only watch a handful of channels but are forced to pay for all of them. In a bundle package, subscribers pay a lower monthly fee for fewer channels. This service is expected to attract younger viewers who have a smaller budget and follow specific shows.

Apple has not made a formal announcement introducing the service, but it is expected to be available in the fall for $30 to $40 a month.

On March 17, analyst Maynard Um of Wells Fargo maintained a Market Perform rating on Apple with a price target between $120 and $130. Um noted that Apple's television service is a smart method to retain customers since the service is available on iOS devices.

The analyst commented that Apple's streaming service could boost revenue, but believes "margins may be low when taking content and other costs into account." He continued, "Rather, we believe this strategy could be to drive further lock-in to stem any threats of attrition and potential to gain share (i.e. hardware sales)."

Um added that the potential of a future full-blown Apple television set is "unlikely over the medium-term" because the technology company lacks experience in the sector and needs to boost subscriptions.

Maynard Um has rated AAPL 70 times since January 2009, earning a 78 percent success rate recommending the technology giant and a +23.5 percent average return per Apple recommendation. Overall, Um has a 57 percent success rate recommending stocks with a +12.3 percent average return per recommendation.

According to SmarterAnalyst, analyst Gene Munster of Piper Jaffray reiterated an Overweight rating on Apple with a price target of $160 on March 17. Munster noted that he expects Apple's streaming service to "lay the groundwork for an actual Apple television, potentially announced in 2016." Apple's streaming service clears the hurdle of acquiring content for a standalone television.

Munster estimates that an Apple television set could boost revenue by 5 percent-10 percent in 2017 and believes it is the company's "most logical next area of focus."

Gene Munster has rated Apple 134 times since January 2009, earning a 78 percent success rate recommending AAPL with a +32.1 percent average return per Apple recommendation. Overall, Munster has a 69 percent success rate recommending stocks with a +28.3 percent average return per recommendation.

On average, the top analyst consensus for Apple on TipRanks is Moderate Buy.

Latest Ratings for AAPL

DateFirmActionFromTo
Oct 2016Goldman SachsMaintainsBuy
Oct 2016Credit SuisseMaintainsOutperform
Oct 2016PiperJaffrayMaintainsOverweight

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The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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