Goldman Sachs just significantly slashed its price target for Apple, predicting 26% downside to the shares because of a “material negative impact” on earnings for the accounting method the iPhone maker will use for an Apple TV+ trial.
“We believe that Apple plans to account for its 1-year trial for TV+ as a ~$60 discount to a combined hardware and services bundle,” wrote Goldman analyst Rod Hall, in a note.
“Effectively, Apple’s method of accounting moves revenue from hardware to Services even though customers do not perceive themselves to be paying for TV+. Though this might appear convenient for Apple’s services revenue line it is equally inconvenient for both apparent hardware ASPs and margins in high sales quarters like the upcoming FQ1’20 to December,” Hall added.
Apple shares slipped 0.7% in premarket trading on Friday from its previous close of $223.09 a share. Goldman cut its 12-month price target on Apple to $165 from $187.
Apple did not immediately return CNBC’s email request for comment.
— With reporting by Michael Bloom
