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Apple Music Could Account For 5% Of 2016 Revenue, Morgan Stanley Says

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Apple Music Could Account For 5% Of 2016 Revenue, Morgan Stanley Says

In a report published Tuesday, Morgan Stanley analyst Katy L. Huberty maintained a Buy rating and $166 price target on Apple Inc. (NASDAQ: AAPL), while mentioning that with improvements in personalization and the introduction of new apps and services, 20 percent of the company's profits could be contributed by Services by 2017.

The company is expanding its Services platform with the launch of Apple Music, "a platform for streaming personally curated music, 24/7 global radio, and connecting artists to fans. The service will launch in 100 countries for $9.99 per month or $14.99 for a family of up to 6, with the first 3 months free. A billion people will have access to Apple Music via the iPhone, iPad, iPod touch, Mac and PC starting June 30," Huberty said.

The analyst believes that Apple Music would contribute as much as 5 percent of the revenue and 2 percent of the EPS in FY16, with every 1 percent penetration of the company's customer base leading to revenue growth of 0.5 percent and EPS of $0.02 in FY16.

Related Link: Why Apple's 'Me-Too' Music Service Was The Worst Part Of WWDC

According to the Morgan Stanley report, "Apple announced new partnerships including an incremental 300K US locations accepting Pay, store credit cards, and reward programs. Additionally, Apple Pay becomes available in the UK next month with participation from 2,500 banks and 250K locations including the London transport network."

In fact, the analyst believes that the company aims to replace every credit/debit card, rewards program and ticket with its Apple Wallet in the future. Also, iOS 9 offers a higher degree of personalization for everyday mobile usage, along with proactivity and intelligence. It incorporates intuitive functioning with improvements in various features, such as improved map functionality. It also includes features that improve the iPad experience.

"Apple recently hit 100B app downloads with $30B in payments, implying a consistent app download run-rate but with accelerating monetization," Huberty added.

Latest Ratings for AAPL

DateFirmActionFromTo
Feb 2021RBC CapitalAssumesOutperform
Jan 2021DA DavidsonMaintainsBuy
Jan 2021Deutsche BankMaintainsBuy

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