Apple falls below $1 trillion as TV+ discounts said to weigh on earnings

Shares of Apple Inc. dropped Friday to send the technology behemoth’s market cap lower than $1 trillion, after Goldman Sachs slashed its price target on concerns that Apple TV+ act as a drag on earnings.

The stock AAPL, -2.35%  slumped 2.2% in midday trading to pace the Dow Jones Industrial Average’s DJIA, +0.14%  decliners. Apple’s market capitalization regained its trillion-dollar status earlier this week for the first time since November 2018, after the company showed off new iPhones and detailed pricing for its subscription streaming offerings.

Goldman Sachs analyst Rod Hall checked in on Apple in response to those announcements Friday morning, and cut his stock price target to $165, 24% below current levels, from $187, while keeping his rating at neutral, citing potential negative effects from some of the pricing decisions Apple made.

Also read: Apple iPhone even reveals dramatic change in strategy.

Hall said he believes Apple plans to account for its one-year free trial for Apple TV+ as a $60 discount to a combined hardware and services bundle, which will likely result in lower average selling prices (ASPs) and margins but higher services revenue growth. He sees Apple’s approach to accounting for TV+ as consistent with how embedded services such as Apple Maps and Siri are accounted for, even though TV+ clearly has a set price and can convert to an actual revenue stream after the free-trial period ends.

That might seem convenient for Apple, at a time that the company is trying to decrease its reliance on the iPhone, but Hall argues the point.

Opinion: Apple’s new iPhones are overpriced and behind the times.

“Effectively, Apple’s method of accounting moves revenue from hardware to services even though customers do not perceive themselves to be paying for TV+,” Hall wrote in a note to clients. “Though this

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