Apple made a big move: where will it lead?

Apple made a big move: where will it lead?

2019-11-11 • Dikemaskini

Last Monday Apple announced a big change in its strategy. The company decided to diversify from gadgets and get into digital services. Here are the 4 new things Apple will develop this year:

  1. A subscription video streaming service with original content called Apple TV+.
  2. A subscription service for its Apple News app named Apple News+ that will provide access to more than 300 magazines and newspapers.
  3. An Apple-branded credit card, built to take the full advantage of iPhone technology, Apple Pay, and the Wallet app. The card will be developed in partnership with Goldman Sachs and Mastercard.
  4. A gaming service featuring a collection of ad-free iOS games.

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Apple’s move is natural. We have already pointed out that the sales of smartphones have slowed down. On the contrary, the App Store is already generating significant income. According to market intelligence firm Sensor Tower, total spending at the App Store was equal to $47 billion in 2018. The researcher expects this amount to more than double by 2023.

Now the iPhone manufacturer is getting into a rapidly developing market of video streaming. The decision offers great potential for the company’s advancement in the years to come. It will be able to become less dependant on iPhones and acquire a new source of income.  

Apple possesses some key ingredients that are necessary for success. In particular, it has plenty of cash at its disposal: in March, the tech giant had $86 billion on hand and another $45 billion in leveraged cash flow. Apple will definitely need the money to produce original content. For comparison: the same numbers for Netflix, the world's leading internet entertainment service, accounted for $3.71 billion and $8.47 billion respectively. The second strong feature of Apple is that it already has a large base of 1.4 billion iPhone owners among which it will be much easier to promote the new services.

As for the challenges that arise ahead of the company, the first thing to mention is tough competition. Apart from Netflix, the segment is also explored by Amazon, Disney, and AT&T, so the market is crowded by large firms. In addition, Apple is essentially getting into a new business, where its management doesn’t have experience and deep knowledge.

So far, the market reaction to Apple’s announcement was modest as the company didn’t provide enough details about the new services. The biggest question is how Apple will price the subscription programs. Some analysts also criticized the credit card for the lack of uniqueness and noticed that several large newspapers refused to join Apple’s news project. Nevertheless, the concerns and questions will likely be resolved and answered in the months ahead. If we think about the long term, the news is certainly exciting and will attract investors to Apple.

Apple stock has been rising since the start of 2019 but met resistance ahead of the psychological level of $200 (61.8% Fibonacci retracement of the 2018 decline). The 200-day MA at 193.00 is another, closer resistance level. To resume the uptrend and get an opportunity to revisit last year’s highs near $230, the price needs to overcome these obstacles. Support lies at 188.65 (50-week MA) and 178.00 (this year’s support line).

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