Here’s why Goldman Sachs Believes Apple Could See 26% Downside

Goldman Sachs isn’t making many friends this morning.

Just days after Apple (AAPL) released information of a significant number of new products, Goldman Sachs predicts 26% downside for the stock.

In fact, just moments ago, Goldman cut its price target for Apple because of a “material negative impact” on earnings for the accounting method it’ll use for the Apple TV+ trial, as noted by CNBC.  “We believe that Apple plans to account for its 1-year trial for TV+ as a ~$60 discount to a combined hardware and services bundle,” wrote Goldman.

“Effectively, Apple’s method of accounting moves revenue from hardware to Services even though customers do not perceive themselves to be paying for TV+. Though this might appear convenient for Apple’s services revenue line it is equally inconvenient for both apparent hardware ASPs and margins in high sales quarters like the upcoming FQ1′20 to December.”

While Goldman is not accusing Apple of improper wrongdoings, they do believe hardware profit margins will take a hit on the TV+ free trial.  They fear investors could react negatively. 

At the moment, the firm has a neutral rating on the stock and has cut the price target to $165 from a previous level of $187.