Why An Apple TV Service 'Seems Real' This Time
Pacific Crest Securities said Apple Inc. (NASDAQ: AAPL) is likely to launch an online multichannel pay TV service shortly. The analysts discounted the fact that this rumor has surfaced in the past only to be followed by nothing.
"Technology development, changes in the pay TV universe, commentary from major network owners and Apple's need for large new profit opportunities suggest that this time it is likely to be real," the analysts argued.
The opportunity here is real, Pacific Crest said, noting that "Apple could shift landscape of pay TV." Since the company has had time to "build a compelling user interface and develop the technology and processes necessary" to operate its TV service, the analysts said Apple TV could "alter" consumer expectations for what TV could be.
For the industry, an Apple service "would create significant risk" for Comcast Corporation (NASDAQ: CMCSA) and Time Warner Cable Inc (NYSE: TWC), Pacific Crest said. And while satellite providers are also "highly at risk," Pacific Crest forecasted that spectrum value and pending M&A will help DISH Network Corp (NASDAQ: DISH) and DIRECTV (NASDAQ: DTV).
For Apple, the immediate impact to earnings and revenue would not likely be material. Pacific Crest estimated it could drive $0.07 in EPS, meaning it would not be "a large profit center" for the company. However, more products in more categories would help Apple "increase device stickiness," particularly if the Apple Watch enthusiasm "deteriorates."
For the year, Apple has gained 14.4 percent to close Monday at $126.32. The stock is 6.5 percent below its all-time high of $134.54.
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