The long-anticipated streaming music service from Apple (AAPL), Apple Music, has launched today. And despite some controversy in the weeks leading up to today’s release, Apple Music should add yet another perk to being a member of the Apple ecosystem.
The launch could mean good things for owners of AAPL stock.
In fact, in the eyes of Wall Street research outfit FBR Capital Markets, AAPL stock is worth $185 per share. That implies nearly 50% upside from its closing price below $125 on Monday. Not surprisingly, FBR maintained an “outperform” rating on Apple shares.
Here are a few things investors should keep in mind as Apple Music goes live.
Bad News for Pandora, Spotify, Google
Today’s Apple Music launch is bad for anyone and everyone in the music streaming business that isn’t AAPL. I’m talking to you, Pandora (P), Spotify and Google (GOOG, GOOGL).
A streaming service like Apple Music was the ultimate endgame AAPL CEO Tim Cook had in mind when he snapped up Beats, the popular company started by Jimmy Iovine and Dr. Dre, for $3 billion last year. While consumers mostly knew the Beats brand due to the popular over-the-ear headphones (“Beats Electronics”), the fellas in Cupertino saw Beats Music (the subscription streaming business) as a powerful opportunity.
Apple Music, which initially will come with a 3-month free trial, will have several pricing tiers, beginning at the $9.99/month level for a single membership. AAPL also has options for those who just want to share accounts; a family membership will set you back $14.99/mo, and you can add up to six accounts.
Pandora, Spotify, and GOOG all have free, ad-supported streaming radio, but the real goal is to convert casual listeners into premium members. Pandora costs $4.99/mo, Spotify $9.99/mo, and Google Play Music also costs $9.99.
The great advantage AAPL has — that almost no other company in the world can match — is the hundreds of millions of credit cards it has on file. Coupled with the hundreds of millions of Apple devices floating around out there, installing — and ultimately paying for — Apple Music is easy as pie.
Apple Music is yet another bastion strengthening AAPL’s already legendary ecosystem, which once again stands out as a major selling point:
Indeed, says FBR,
“We ultimately believe additions to the Apple ecosystem, such as Apple Music, represent a critical component of Apple’s strategy and will add upside potential to the company’s growth prospects over the coming 12 to 18 months.”
But aside from bullish analyst predictions calling for a 50% AAPL stock price rally, and apart from the unparalleled leverage AAPL enjoys from its sprawling customer base, there’s one more thing that bodes well for Tuesday’s Apple Music launch: Taylor Swift is over the whole boycott thing, and Apple Music will be the first service to stream her hit album 1989.
As of this writing, John Divine was long shares of AAPL stock and GOOG stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
