Fitness+ may draw thousands of stand-alone subscribers, says analyst Samik Chatterjee, but Apple One will get millions.
From a note to clients that landed on my desktop Friday:
Fitness+ synergies with Watch and Apple One Premier, but ramp in content will take time. While comparisons with Peloton’s Digital subscriptions are likely, investors should be mindful that the depth of content on any new service takes time to ramp. However, the synergy with the platform for Health & Fitness and Apple Watch hardware is undeniable and adds to reasons for customers to choose the iOS ecosystem and Apple Watch. Additionally, increasing relevance of digital fitness and coaching, a largely nascent market till a couple of years ago, will help in driving adoption.
Early engagement to be driven by access through Apple One Premier. We believe the early engagement for Fitness+ app will be driven by users accessing it through subscription to the Apple One Premier plan – which we expect to be the primary portion of all Apple One subscriptions. While Fitness+ stand-alone subscribers and direct revenue is expected to remain limited, we expect the strong adoption of the Apple One Premier bundle and the value in that bundle attributable to Fitness+ to be the primary driver of revenue that can be attributable to Fitness+.
Estimate Apple One to drive 200-300 bps of upside to Services in FY23. Apple One leverages the success of Apple Music and we would expect Music family subscribers to see strong value in the Premier subscription, driving adoption in the millions, while subscribers to Fitness+ stand-alone subscriptions remain in ‘000s. However, Fitness+ adds value to Apple One subscriptions, which we estimate will drive 200-300 bps of upside to Services revenue in FY23 from incremental revenue capitalized on through the bundled offering.
Maintains Overweight rating and Street-high $150 target.
Cue the chart:
Click to enlarge.
My take: Apple things equal, I wouldn’t subscribe to Fitness+. But I’ll get it because swapping my current family plan for an Apple One premier bundle makes sense.