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The analyst maintained an Equal Weight rating and a $149 price target on Apple in the note Wednesday. The tech giant’s shares are currently up over 31% this year.
“TV+ is a small revenue contributor to AAPL Services (2% by our estimates),” said the analysts. “We also estimate it currently has a negative operating margin as it is loss-making and dilutive to EPS ($0.30 EPS loss in CY22). We currently model Apple TV+ losses plateauing beginning in 2025 based on amortized content spend of around $6B each year (cash spend of ~$9B).”
In addition, Barclays estimates Apple TV+ revenue to grow at a 30% CAGR, above the low-teens growth that is the average for the streaming industry. The firm also models 52% revenue growth in CY23, “driven by price increases instituted in October 2022, which should offset modest user churn.”
Barclays also believes the Apple TV+ paid subscriber base was at ~29 million in 2022 and sees it rising to 39M in 2025.
“Incremental content spend could take some cash away from buybacks,” the analysts added. “We think investors would prefer more stock buybacks or a higher dividend yield over content spend.”
