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Why Wall Street Hasn't Lost Faith in Apple's New Toys

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Apple (AAPL) - Get Free Report shares didn't move after the Cook & co. announced its new subscription services Monday. 

The stock fell 1.51% to $185.89 a share Tuesday, after having fallen slightly Monday. 

And Wall Street's top analysts said the near term earnings lift from all the services isn't looking that impactful -- albeit more details about each service need to emerge. 

For the new Apple Card, for example, Goldman Sachs analysts wrote in a note out Tuesday, assuming a specific take-rate and number of transactions, revenue from Apple Card should be only $882 million and additional earnings per share should be only be 12 cents by 2020. 

But Wall Street implied something:

The stock is promising on a longer-term basis. Many analysts upped their price targets, and no analysts reduced their price targets. Cannacord Genuity raised its price target to $230 a share, 24% above the stock's current level.

Morgan Stanley raised its price target to $220 from $197. Apple's strategy "aligns with our thesis that services, not devices, hold the key to Apple revenue and profitability growth over the next 5 years," Morgan Stanley analysts wrote in a note out Tuesday. "We still believe Apple is likely to bundle hardware/services and/or multiple services over time." 



Apple's Key to Future Success: Hardware-Services Synergies

While the market needs more details on Apple News Plus and Apple TV Plus -- namely revenue sharing agreements between Apple and its content partners -- there's much to be said for the long term success of the Apple Card. 

User adoption could take some time for what seems to be a value added service. "The potential to accelerate Apple Pay adoption are likely more impactful than any initial revenue contributions as we do not expect the captive card offering to contribute materially to earnings in the near term," said analysts at Cowen & co. in a Tuesday note. JPMorgan analysts said "The introduction of Apple Card will allow the firm to leverage the growing adoption of Apple Pay and capture a greater portion of the fees in the payment ecosystem." 

Related.Apple's Grand Ambitions Face Healthy Skepticism

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