Apple Services Growth Unlikely To Offset Iphone Declines, Says Jefferies

It appears that Apple will likely announce its new over-the-top streaming service as soon as late March for a potential Spring release, Jefferies analyst Timothy O'Shea tells investors in a research note titled "Apple Video Coming Soon; Not Feeling the Love".

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The analyst says that while Apple Video represents upside to his detailed Services model, unfavorable economics might discourage third-party content producers from participating, limiting its growth potential. He thinks the service will operate similarly to the App Store where Apple will take a 30% revenue cut. Further, O'Shea points out that it would take 250M subscribers to represent 5% of 2023 revenue.

For now, Services growth is unlikely to offset iPhone unit declines, which should persist through 2019, contends the analyst. He keeps a Hold rating on Apple with a $160 price target. The iPhone maker closed yesterday unchanged at $170.80.

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