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Apple's (AAPL) iOS 13.5.5 Beta Hints at Services Bundle Plan

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Apple (AAPL - Free Report) hit a 52-week high on Jun 5 to close at $331.5, reflecting optimism on the smartphone market’s resilience against the coronavirus onslaught despite IDC’s apprehensions of a 12% slump in 2020. This marked the first record closing high since Feb 12 when shares closed at $327.20.

The outperformance can also be attributed to Apple’s robust Services business, which has now become its new cash cow. Notably, both Apple Music and cloud services set an all-time revenue record in fiscal second quarter, while AppleCare reported the best second-quarter performance in the company’s history. Moreover, Apple’s new services — Apple TV Plus, Apple Arcade, Apple News Plus and Apple Card — continued to add users, content and features.

Apple now has more than 515 million paid subscribers across its Services portfolio, up 35 million sequentially and 125 million year over year. The company expects to reach its target of 600 million paid subscriptions before the end of calendar 2020.

To further boost top-line growth from its services portfolio, Apple may start offering a service bundle that combines access to Apple Music, Apple TV+ and other services such as Apple Arcade, for a single monthly subscription cost, per The Street Report.

Apple Inc. Price and Consensus

Apple Inc. Price and Consensus

Apple Inc. price-consensus-chart | Apple Inc. Quote

Apple’s Bundle Offering Holds Promise  

Apple has been rumored to bundle its services together before, with a Bloomberg report claiming that the company was negotiating deals with publishers and music producers to bring a suite of content into a single monthly cost.

The iPhone-maker currently offers four entertainment subscription services, including Apple New+ ($10/month), Apple Arcade ($5/month), Apple Music ($10/month), and Apple TV+ streaming service ($5/month) with access for up to six family members at a time.

The latest iOS 13.5.5 internal files include references to a ‘bundle offer’ and ‘bundle subscription’ that didn’t exist in previous iOS versions. Apple News+ and Apple TV+ are not as popular as Apple Music, so a bundle could drive top-line growth and also keep users even more tied to its ecosystem.

Notably, a family sharing combination of Apple Music, News+, and TV+ would total $30 per month. However, as consumers tend to have quite a few subscriptions at once, such as Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) Prime Services, and Disney’s (DIS - Free Report) Disney+, an additional $30 dollars a month could prevent subscriptions.

Markedly, Disney+ is benefiting from Disney’s bundle offering that comprises ESPN and Hulu. The service has quickly gained more than 50 million subscribers despite stiff competition from Netflix and Amazon prime video. This is encouraging for Apple.

Meanwhile, this a Zacks Rank #2 (Buy) company has already been pushing its services business with tempting offers like free Apple TV+ for one year on new iPhone/iPad purchases or an affordable 'students' bundle of TV+ and Music. This offering could further drive that effort. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Moreover, a new Apple News+ Audio feature will be added to the existing Apple News application soon. The new Audio tab will provide News users with access to recorded versions of news stories through an interface that will be similar to that of Apple News.

We believe that Apple’s bundled services offering in an affordable package could also boost the appeal of its upcoming iPhone 12. Not only will Apple fans get a new iPhone, potentially with a 120Hz refresh rate display, more power, an upgraded camera system, they could also get access to load of services that could complement the iPhone 12 models when they arrive by the end of the year.

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