Apple Inc: Could the Apple TV Be a Big Catalyst for AAPL Stock?

Apple IncApple TV a Catalyst for AAPL Stock

Although shares of Apple Inc. (NASDAQ:AAPL) took a beating last year, investors should take a second look at the upcoming Apple TV set-top box. This could be the best thing to happen to AAPL stock in a long time.

There was a long period during which analysts thought Apple would launch a physical product called the “Apple TV.” Since the company already offered every other screen-based device, the extension to an Apple TV device seemed natural enough. However, no one thinks that’s a good idea anymore.

The slowdown of device sales across the world has poured cold water on the idea of a physical Apple TV. Luckily, the company itself abandoned that plan long ago. Apple must have seen the writing on the wall, because the Apple TV it has been hinting at sounds way better than what analysts imagined. In fact, this approach to TV is far more representative of the company’s evolving identity.

Apple TV as a Service

Rather than offer customers a physical Apple TV, the company has decided to opt for a video streaming service à la Netflix, Inc. There would be one big difference between Apple TV and Netflix, though: Apple TV would have live streaming video channels in addition to the on-demand service. (Source: “The 13 biggest announcements from Apple WWDC 2016,” The Verge, June 13, 2016.)

This means some channels would function like regular TV, with a steady stream of programming that flows independent of the viewer’s selection. The networks decide which shows go on and when.

This concept of live streaming channels would differentiate Apple TV from any of the existing video services. For instance, on Netflix, the user has to make a choice of what they want to watch. While that freedom can be liberating, sometimes, it’s simply a nuisance. You don’t always know what you want to watch. With traditional cable TV, there was the chance of stumbling across a good show, new movie, or a rerun of a classic when flipping through channels, but that doesn’t exist on Netflix. There is no room for serendipity.

Apple is hoping to exploit this gap by offering live streaming of channels. One of the major advantages is this Apple TV strategy could be to offer ESPN, which is something no other streaming service offers. Live streaming sports is the final frontier for this service industry.

Think about it: anyone tempted to cut the cable and opt for a video streaming service has to give up on watching sports. With Apple TV, users don’t have to make that choice because it would offer the best of both worlds.

Could AAPL Stock Finally Bounce Off Apple TV?

The saturation of the smartphone, tablet, and personal computer markets has caused a reckoning within the industry. Companies that were primarily engaged in device manufacturing like Apple have been forced to find new ways of making money. This reorganization has terrified investors, which is why AAPL stock dropped 20% in the last year. Apple TV could be exactly the tonic this company needs.

The price point for this service is estimated at $30.00–$40.00, plus the initial cost of an Apple TV set-top box. Some people might say that forcing a set-top box on consumers is just Apple doing what it always does—selling us a device—but there’s a crucial difference this time. The set-top box doesn’t need to be replaced every two years, so it’s not the company’s primary stream of revenue.

Subscriptions to Apple TV are what the company is aiming for, because services are the only way Apple will continue to thrive. This is the catalyst AAPL stock and its investors have been waiting for.