Barclays has raised its price target for Apple Inc. (NASDAQ:AAPL) to $207 from $197 and reiterated an equal-weight rating on the stock after the Cupertino, California-based device and services company made the unusual move of launching its streaming service for next to nothing with its annual product event on Tuesday.

Apple stock traded at $220.34 on Wednesday morning, up 1.7% on Tuesday’s close.

In a note published after the annual Fall event, analysts at the bank noted that Apple announced new hardware products and provided updates on new services, but they “saw little surprises except for price points.”

READ: Morgan Stanley reiterates $247 price target on Apple, sees App Store growth outperforming

“The Apple TV+ service is only priced at $4.99/month. The new iPhone 11 starts at $699, which is $50 lower than the XR last year. Also, the company did not raise the price of Apple Watch despite the 15% tariff,” the Barclays‘ analysts noted.

“We believe lower average selling prices (ASPs) make sense as price elasticity has really kicked in for iPhones this year. While all these actions should help units, we believe gross margins will come under more pressure. Service pricing surprised on the downside.”

Streaming service for next to nothing

The analysts said the “biggest surprise” for them is that Apple priced its streaming video service, Apple TV+, at $4.99 per month, which is cheaper than any other major service. It is also giving customers a year of Apple TV+ for free if they buy a new iPhone, iPad, Mac or Apple TV box.

“This is reasonable pricing, given the small number of programs available during the first year, and should help Apple gain an initial audience base for its content,” they added.

Apple may have been forced to keep the price low as more competitors prepare to launch their own services with larger video libraries full of popular shows and movies.

“That said, given the massive content investments reported by press (approximately $6 billion), this pricing could prove dilutive to services margin in the short and medium term,” noted the analysts.

Barclays said the hardware product line pricing was more aggressive, with the legacy iPhone XR set at $599 starting price, indicating a $150 cut.

The analysts said they have tweaked their model for Apple to add some iPhone units, and lower ASPs and gross margins.

“Our estimates for EPS for FY19/20 go from $11.66/$12.83 to $11.65/$12.85,” said the analysts.

“Upside on iPhone units are largely offset by lower ASP and margin pressure. We stay Equal Weight but raise our price target to $207 from $192.”

Contact Uttara Choudhury at

Follow her on Twitter: @UttaraProactive