In this day and age, traditional TV packages and cable service are becoming a thing of the past, as streaming services take over the market. Currently, the largest of those competitors are Netflix, Hulu, and Amazon Prime Video. However, Morgan Stanley sees a new competitor really taking control of the market by the year 2025.
According to Morgan Stanley, Apple’s video streaming offering will be a multi-billion business within the next ten years. In a quote from analyst Katy Huberty in a note entitled: “The Emerging Power of Apple Services, Part 3: Video a New Growth Driver in 2019.”, she said, “We believe that Apple Video will become a reality sooner than investors think … Optionality around Apple Video helps emphasize the increasing contribution to growth from Services. While not a first mover, Apple’s attractive and sticky customer set combined with low friction sign-up and payment system could drive users to its video platform, even with a less complete content portfolio vs. Netflix.” She went on to say, “Apple has the world’s most valuable technology platform with 1.3Bn active devices and is well positioned to capture more of its users’ time in areas such as video, augmented reality, health, autos, and home.”
In addition to commenting on the future success of Apple’s video streaming offering, Huberty and Morgan Stanley updated their price target for Apple’s stock. Previously, the target was set at $232 but was raised by 7% to $245, in large part due to the continued growth of Apple and the projected success of their streaming service. In her analyst, Huberty said that she believes Apple’s video services can generate sales of more than $4 billion by the end of 2025 and even an estimated $500 million by the end of next year. In comparison, Netflix achieved revenues of greater than $11.5 billion in 2017 and Hulu clocked in right around $2.5 billion in the same year.
Also, in comparison to their competitors, Huberty thinks that they will offer the video services at a lower end. She said, “We forecast that an Apple Video streaming service with high quality, but limited breadth could be priced at the low end vs. competitors, or $7.99/month.”
To date, Apple’s shares are already up 35% this year. More recently, Apple also became the first US company to reach the $1 trillion mark, shortly followed by Amazon. As a result of the share, Netflix shares also dropped 4% in trading on Wednesday.