Apple's tricky accounting for streaming TV trial to have 'material negative impact': Goldman Sachs

Goldman Sachs said Friday that Apple’s “free” TV+ trial will have a “material negative impact” on its bottom line, sending shares lower.

Earlier this week, at a special event on its Cupertino, California, campus, Apple said anyone who buys a new iPhone, iMac or iPad will get one year of Apple TV Plus for free.

“Effectively, Apple’s method of accounting moves revenue from hardware to Services even though customers do not perceive themselves to be paying for TV+,” wrote a team of San Francisco-based analysts at Goldman Sachs.

“Though this may 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,” the analysts wrote.

The bank says the free TV+ trial will result in a 16 percent hit to earnings per share in the first quarter of fiscal year 2020 and take 14 percent off its full-year earnings. Analysts at the firm lowered their price target from $187 a share to $165 – almost 25 percent below current levels.

Goldman has taken a slightly contrarian tone to most of Wall Street.

Apple wowed analysts across the Street on Tuesday when it announced its new streaming service would cost $4.99 a month, undercutting its rivals.

Wedbush Securities called the announcement a “show stopper” and “major shot across the bow” at Netflix and Roku, which have their basic services priced at $9 and $5.99, respectively.

Wall Street analysts as a whole are bullish on Apple, with an average price target of $224.82, according to IBES.

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Apple shares were up almost 39 percent this year through Thursday. The company's market capitalization on Wednesday reclaimed the $1 trillion mark for the first time in 10 months.