In the past, Cook has said, "Apple doesn't do hobbies as a general rule," when speaking about Apple's existing set-top box. He followed that up by saying that the company "always thought there was something there, and that if we kept following our intuition and kept pulling that string, we might find something larger." Apple sold 1.3 million Apple TVs in its most recent quarter.
It's unclear at this point if Apple is abandoning its television set plans, or if this will be an add-on to the existing Apple TV. There's also the potential for the technology to be put into an actual television, The Journal said, citing two people briefed on the matter. Credit Suisse analyst Stefan Anninger wrote "the traditional pay TV bundle may be more change-resistant than some of us, and Silicon Valley, had expected."
JP Morgan analyst Mark Moskowitz views this as not a change in strategy, but a "safe stepping stone" to get into the market eventually. He believes Apple could achieve the same result in keeping users engaged, without having a lower margin product, such as an actual television."It is still early as relates to Apple pursuing the TV market. While the ultra-bulls on Apple have been incorporating a full-fledged TV into their longer-term estimates, we think the prospect of a set-top box is not a setback," Moskowitz wrote in a research note. "We think it is better to see how the set-top box is received first, as the set-top box could accomplish the construction of another pillar to Apple's digital hub approach." He rates Apple "overweight" with a $675 price target. This may also signal a change in strategy, Atlantic Equities analyst Chris Watts said in a research note. "What is significant is that AAPL appears to have decided to try and work within the PayTV ecosystem than outside it," Watts wrote in a research note. "While several indicators were already pointing in this direction (nine unsuccessful months talking to content providers, the complexity associated with replicating content deals on a global basis, and the decision by peers such as MSFT to follow similar routes), this makes a direct-to-consumer OTT solution from Apple look even less likely in the near term." He rates Apple "overweight" with a $760 price target. OTT, or Over The Top, refers to services that are not offered via a traditional network operator.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts