Apple clashes with its Apple Card partner over TV+

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Apple within 3% of hitting amazing all-time high valuation
Apple and Goldman Sachs disagree over Apple TV+ accounting.
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Apple partnered with Goldman Sachs to launch Apple Card. But that doesn’t guarantee that the two entities will always see eye-to-eye.

Late last week, Goldman Sachs cut its price target on Apple shares to $165. That gives it the lowest expectations for Apple of all major Wall Street banks. Following the news, Apple hit back at its partner, arguing that its claims were ill-founded.

Goldman Sachs’ price target cut (from a previous $187) followed a research note from analyst Rod Hall. Hall wrote that Apple’s TV+ subscription service will result in lower gross margins and profits. “Effectively, Apple’s method of accounting moves revenue from hardware to Services even though customers do not perceive themselves to be paying for TV+,” Hall wrote.

The aspect of Apple TV+ he takes issue with is Apple’s one year “free” trial to customers who buy a new Apple device. This looks like a freebie for customers. But Hall suggests Apple will account for it as a $60 discount on its hardware. That means slimmer margins.

“We currently assume this is an introductory offer that runs for just one year,” Hall continued. “Should it run longer our out year forecasts would also likely need to be adjusted in a similar way.” Goldman Sachs currently has a “neutral” rating on Apple.

In a statement, Apple disagreed with the assertion. It noted that it, “does not expect the introduction of Apple TV+, including the accounting treatment for the service, to have a material impact on our financial results.”

AAPL shares are currently trading at $218.75. That gives Apple a market cap of $988.571 billion, dipping below the $1 trillion mark it crossed for a second time last week.

Source: CNBC