The Apple One bundle, long rumored, will excite Wall Street

For Apple investors, the most exciting product the company can release this fall is not the new version of the iPhone or Apple Watch: it’s a bundle that combines some of the company’s subscription services to give users a discount on subscriptions. One at a time.

The recommended name of the bundle is “Apple One” not confirmed by Apple, but by the tech blog 9to5Google The code, which will be found in the Apple Music Android app earlier this week, suggests that the iPhone maker will integrate its music service with other subscriptions such as Apple TV +, Apple Arcade and iCloud Storage.

If Apple One starts this fall, Wall Street investors and analysts will be happy. An apple bundle has been on investor wish lists for years.

“We’ve long argued that compilation services are a unique tool in Apple’s possession,” Goldman Sachs analyst Katie Huberti wrote in an August note.

The theory is that an Apple bundle will anchor Apple’s growing service business, increase the number of subscribers, and complete the transition from Apple as a hardware maker based on annual iPhone updates, to a multi-continuing revenue-generating technology and software company and a self-strengthening ecosystem, product or product Will raise the share price without dramatically increasing.

An Apple Bundle can differentiate Apple’s services, raise subscribers to Apple’s less popular services, integrate with Apple Pay and Apple Card, and lock customers into the Apple ecosystem, Huberti wrote. Apple has set a goal of 600 million subscribers by the end of 2020 (including subscribers to App Store apps), Huberti writes, and a bundle will help hit and exceed that goal.

To some extent, Apple has already begun to change its story with investors. As executive investor Carl Eichen writes, they now give the company a richer rating than they did in 2015. Open letter to Apple CEO Tim Cook Raises the impression that Apple’s ecosystem is underestimated.

As of Thursday, Apple’s P / E rating was close to 34.5, compared to 10.9 when Icon wrote its letter, according to FactSet. It was mostly Powered by Apple Online ServicesIt accounted for 22% of the company’s revenue for the quarter ended June.

Icon, who He sold his Apple shares in 2016, Suggesting that Apple could increase its P / E ratio by aggressively expanding the TV market, and that a key part of that strategy would be a “lean bundle” of media companies’ pay-TV shows and movies with streaming music service.

The “skinny bundle” never worked, and Icon never predicted the physical TV that Apple would make. But in recent years, Apple has made some moves toward that vision. Last November, Apple released the Apple TV +, which has a 99 4.99 subscription per month, allowing users to access Apple-funded TV shows, movies, and documentaries. Inside the Apple TV app, users have access to both CBS and Showtime, two streaming channels, 99 to 9.99 per month, Saving $ 11 per month rather than purchasing both services separately.

But Apple had the idea of ​​a bundle and significant continued revenue Caught Among the people who realized that Apple was underestimated. Goldman Sachs researcher Simona Jankowski Floated If Apple had its own content in 2016, it could compile up to $ 50 a month with hardware like Apple Music and Apple TV set-top boxes and the iPhone. Bernstein researchers said There was a lawsuit to buy Apple Netflix to create a bundle to combat Amazon Prime.

The concept of “Apple Prime” was born among Apple audiences and fans.

It is not clear at what price Apple will compile exactly. It sells many subscriptions that give a good start:

• Apple TV +, streaming video 99 4.99 per month
• Apple Music, streaming music at 99 9.99 per month
• Apple Arcade, a selection of games for 99 4.99 per month
• Apple News +, Online Bundle Magazines and Newspapers 99 9.99 per month
• iCloud storage, which allows users to sync data between devices, starting at 99 0.99 per month

Apple has not released subscriber numbers for Apple TV +, Apple Arcade or Apple News + since its launch last year. Apple Music has over 60 million subscribers. Apple said it had 550 million subscribers earlier this year, but that counts the number of subscribers per app in the App Store.

The basic bundle could start with Apple Music and the Apple TV +, a report says From Bloomberg. Additional layers will add Arcade, News + and iCloud storage for an additional fee – but still less than the cost of the services individually.

Something that is unlikely to be included in the bundle: hardware.

Analyst Tony Sakkonaki asked Cook directly about a hardware bundle At a conference call last fall. He did not shoot at the idea, but suggested that something like this was already in place.

“Hardware as a service or as a bundle, if you will, has customers today who look at hardware mainly because they are in upgrade plans, “Cook said during a revenue call.” So for some it is the degree it is today. “

But Cook said he expects the hardware as a service or bundle to “grow proportionately” in the future.

Apple has an iPhone upgrade plan, which was introduced in 2015, which charges users monthly and offers the opportunity to trade in their old iPhone for a new model once a year. Last fall, Apple began offering interest-free funding for Apple products with Goldman Sachs through its Apple Credit Card Partnership.

In the end, Apple does not see its business as Wall Street. It sees Apple as a whole ecosystem. If a user has an iPhone, they will have a better experience if they use Apple software and services heavily, and are more likely to buy Airbnbs or an Apple Watch – or an Apple One bundle. The whole ecosystem is bundled.

If Apple releases the Apple One bundle this fall, it will not talk about P / E rates or whether the company is too valuable as a software-plus-service company. It underscores just how great its services are and why Apple offers more benefits to customers to be a part of the ecosystem.