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Apple’s share price remains downbeat despite music update

Apple’s [AAPL] share price has had a bit of a wobble so far in 2021.

The stock was down 3.7% year-to-date through 20 May’s close and, although it’s up 60.6% in the last 52 weeks, it’s trading 12.3% below its all-time high of $145.09, recorded during intraday trading on 25 January this year.

That said, Apple’s share price performance has not been as spectacularly bad as other technology stocks. Take Spotify [SPOT], for example. Its share price has tumbled 27.3% year-to-date through 20 May and the stock was 41% below its all-time high of $387.44, at which it peaked during intraday trading on 22 February.

Both Apple and Spotify’s share prices have underperformed the broader technology market, with the Nasdaq up 5% in the year to date (through 20 May). In comparison, the Vanguard Information Technology ETF [VGT] has a year-to-date daily return of 2.01% (as of 21 May). The Technology Select Sector SPDR Fund’s [XLK] and iShares US Technology ETF [IYW] have a year-to-date daily return of 3.45% and 0.43%, respectively.

Following the announcement that the Apple Music service was set to launch high-quality options, including spatial audio and lossless audio, at no additional cost to users from June, could Apple’s share price get a boost?

 

Battle of the streaming services

Essentially, lossless audio means music can be compressed to a smaller file size without lowering the sound quality — every detail of the original audio is kept. In theory, a song should sound exactly as the artist intended it to be heard.

There are some big caveats. It wasn’t mentioned in Apple’s press release, but a number of technology publications have since reported that the company’s AirPods, AirPods Max and AirPods Pro won’t support lossless audio. These reports gave technical details of the setup that would be needed to listen to songs in a lossless audio format, and all indications are that it won't exactly be straightforward.

The news does mean Apple has beaten Spotify to introducing high-res audio, though — the Stockholm company will reportedly also introduce lossless audio later this year, but at an extra cost. Despite this, there hasn’t been much movement in Apple’s share price since the news broke on the morning of 17 May.

This could be partly due to the fact that lossless audio might not actually add any value. Writing for Macworld, Jason Cross argued that almost nobody will be able to tell the difference between the original audio and high-res audio.

Writing for Macworld, Jason Cross argued that almost nobody will be able to tell the difference between the original audio and high-res audio

Given that Apple’s AirPods range won’t support lossless audio, there’s also the question of whether there will be consumer demand for it.

 

Subscription stakes

The California-based company hasn’t publicly disclosed how many paid Apple Music subscribers there are since June 2019, when the figure was 60 million. Business of Apps estimated that this figure was 72 million as of last June, and other figures suggest subscribers could now stand at circa 112.5 million. In comparison, Spotify had 155 million paid subscribers at the end of 2020, the company’s fourth-quarter 2020 results showed.

In the three months to the end of March, revenue from Apple’s services segment was $16.90bn, up 26.6% from $13.35bn in the first quarter of 2020. The segment accounted for 18.9% of the quarter’s total revenue of $89.58bn.

During the earnings call, Luca Maestri, Apple CFO, announced its services had added 40 million new subscribers in the quarter, taking the total to 660 million. No indication was given as to how many of these are Apple Music users.

660 million

Apple's total subscribers

Apple CEO Tim Cook (pictured above), also noted during the call that the company’s products and “innovation work” were key to delivering a very strong quarter.

While Wall Street was bullish on the stock, with 26 buy ratings, seven hold ratings and one sell, there is reason to be cautious. In March, renowned Apple expert Ming-Chi Kuo, an analyst at TF International Securities, forecast that AirPods shipments will decline this year.

“We cut our forecast of 2021 AirPods shipments by 30–35% to 75–80 million units, which implies the 10–15% [year-over-year] decline,” Kuo wrote in a note to clients seen by Cult of Mac.

“We differentiated from the market’s consensus of 110–120 million units in 2021, indicating 25–30% [year-over-year] growth.”

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