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​OCTOBER NEWSLETTER

Apple Inc. (NASDAQ: AAPL) is just a few weeks away from its official launch of Apple TV+ on November 1. In the meantime, Wall Street is gauging consumer appetite for another content provider, with Apple officially entering the ring with the likes of Netflix, Disney and Hulu. One key analyst is taking an in-depth look at the streaming services and how Apple will measure up.

Wedbush reiterated an Outperform rating and raised its price target to $265 from $245, implying upside of 15% from the most recent closing price of $230.09.

The boutique investment firm was quick to note:

It is a crucial time for Cupertino as it recently launched its trifecta of new smartphones with iPhone 11 strong out of the gates thus far and now looks to convert millions of Apple device users on to its streaming platform. Taking a step back we remind investors of the “show stopping” low price for Apple’s streaming TV service at $4.99 per month taking a major shot at its content competitors with Netflix front and center as clearly Cook & Co. are looking for market share coming out of the gates with this price point that we loudly applaud. In our opinion with an installed base of 900 million active iPhones worldwide we believe Apple has an opportunity to gain 100 million consumers on the streaming front in the next 3-4 years. We note that Apple is offering Apple TV+ free for a year with the purchase of an Apple device to help stimulate demand for its trifecta of smartphones and build loyalty on the services, which we believe is a smart move.

Separately, Wedbush believes that Apple has a compelling list of new shows coming out as the firm believes it has committed about $6 billion annually to the original shows and movies to beef up its streaming content ambitions going forward. This is a significant step up from the $1 billion that was originally believed to be the annual budget as the company tries to keep pace in the content arms race.

Wedbush went on to say:

In our opinion the lower price points, potential content arsenal (through organic and M&A), and massive installed base could enable Apple to disrupt roughly 10% of Netflix’s target customer base within the next 12 to 18 months and along with Iger/Disney create a much more competitive pricing environment and market share landscape for the golden child Netflix going forward. We believe Apple’s goal here on this streaming endeavor is to be a major distribution platform for content and with 1.4 billion active iOS devices worldwide, with the theme of family and a safer viewing platform, Cupertino is trying to differentiate itself vs. competitors and flex its Apple brand muscles.

If Apple executes with minimal obstacles and aggressively acquires content, given the company’s massive installed base and unmatched brand loyalty it’s possible that it could reach the 100 million subscriber number in the medium term (three to four years) and that could translate into a $7 billion to $10 billion annual revenue stream over time for Apple and further cement its installed base and halo effect.

Shares of Apple traded up about 1.7% at $234.06 on Friday, in a 52-week range of $142.00 to $233.40. The consensus price target is $229.28.

​The National Transportation Safety Board (NTSB) on Thursday announced that it has issued seven safety recommendations to the Federal Aviation Administration (FAA) related to the NTSB’s continuing investigation of two Boeing Co. (NYSE: BA) 737 Max aircraft crashes. The two crashes killed 189 people last October in a crash in Indonesia and another 157 died in a March crash near Addis Ababa, Ethiopia.

Both accidents have been attributed to a new Maneuvering Characteristics Augmentation System (MCAS) designed to push the nose of the plane down if the system detects that the plane’s nose was rising and its speed falling, indicating a possible stall.

In Thursday’s report, the NTSB is “calling upon” the FAA “to address concerns about how multiple alerts and indications are considered when making assumptions as part of design safety assessments.”

According to the NTSB report, Boeing and the FAA made assumptions during the 737 Max’s design and certification that left “a gap between the assumptions … and the real-world experiences of these crews, where pilots were faced with multiple alarms and alerts at the same time.”

The FAA allowed these assumptions during certification analyses without offering “clear direction” about how pilots will recognize and respond to multiple alarms and alerts. The NTSB also states “more robust tools and methods need to be used for validating assumptions about pilot response to airplane failures in safety assessments developed as part of the U.S. design certification process.”

Boeing has updated the MCAS software to address the design flaws and an NTSB spokesperson said that the company already may have completed the additional testing the agency is asking for. In any event, the NTSB wants the recommended testing to be conducted on the Max before it is allowed to fly again.

The agency also recommends that the FAA re-evaluate other airplanes that have been certified under existing FAA rules.

Boeing stock dipped by about 1% earlier this morning but traded down by only about 0.1% in the noon hour at $385.79. The stock’s 52-week range is $297.47 to $446.01, and the consensus 12-month price target is $411.14.

​TV

​BOEING DELIVERIES

​BOEING

Boeing Co. (NYSE: BA) reported Tuesday morning that third-quarter deliveries of its 737 family of jets totaled a mere five, down from 24 in the second quarter and 89 in the first quarter. In the fourth quarter of last year, Boeing delivered 173 737 jets to commercial customers.

The company’s 737 Max single-aisle planes were grounded in mid-March following the crash of an Ethiopian Air plane that killed 157 passengers and crew. The crash was the second for the 737 Max in less than six months. The first, in October of last year, killed 189 when the Lion Air jet crashed into the sea offshore of Indonesia.

The 737 Max is Boeing’s best-selling aircraft by a wide margin. The company delivered 580 copies of the plane last year, compared with just 118 so far this year of both 737 models still in the company’s order book: the older NG and the grounded Max.

Boeing delivered 190 commercial planes in the third quarter of last year, compared with deliveries of just 63 planes in the 2019 third quarter. For the first nine months of the year, Boeing delivered 568 commercial jets last year, compared with deliveries of 302 so far in 2019, a drop of 47%.

The company delivered 35 Dreamliners in the third quarter, down from 42 in the second quarter and 36 in the first quarter. For the year to date, Boeing has delivered 302 of the dual-aisle 787 Dreamliners, nearly three times as many as in the first three quarters of last year, when the company shipped 106 of the planes.

The company also delivered 12 dual-aisle 777s in the quarter, flat with second-quarter deliveries and up from 10 in the first quarter. Boeing delivered two jumbo 747s, the same number as in each of the prior two quarters, and 12 767s, up from 10 delivered in the second quarter. Boeing has delivered 28 767s so far this year, already more than the 27 it delivered in all of last year. The 767 is the base aircraft for the KC-46A tankers Boeing is manufacturing for the U.S. Air Force.

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the company’s defense division delivered nine new tankers to the U.S. Air Force in the quarter, up from five in the first quarter. The Air Force discovered debris rattling around in some of the first tankers delivered and temporarily slowed deliveries to around 1.5 planes per month in the second quarter.

Boeing has got to get the 737 Max back in the air. Earlier this month a Boeing spokesperson told the Wichita Business Journal that the company has targeted getting the plane’s grounding order lifted in the fourth quarter. Wichita is home to Spirit AeroSystems Inc. (NYSE: SPR), the company that builds about 70% of the 737 Max’s structure and is the city’s largest employer. Spirit has been building 52 fuselages a month, the same rate as before the grounding, while Boeing has cut its production of finished planes to 42 a month. Those planes are going into storage.

Boeing stock traded down about 0.5% in the early afternoon Tuesday, at $374.81 in a 52-week range of $292.47 to $446.01. The stock’s 12-month consensus price target is $412.33