“I recently read an interesting article containing excerpts from last week’s Macquarie note to clients regarding Apple,” Bill Maurer writes for Seeking Alpha. “The research firm believes the technology giant’s services business will help to drive a 400 basis point increase in the company’s gross margins over the next five years. If the analyst’s scenario plays out, we’ll be seeing nice revenue and earnings per share growth over the next five years. This analyst obviously disagrees with those who believe Apple’s best days are behind it.”

“The analyst is assuming no growth from hardware after the next iPhone upgrade cycle. Roughly 75% of the growth in gross margin dollars in the next five years comes from services, with nearly 100% of that coming after the iPhone 8,” Maurer writes. “There are a couple of interesting items here. First, the analyst basically believes services revenue will more than double over the next five years, a compound annual growth rate of 17%. That puts Apple services as a $50 billion-plus revenue driver by fiscal 2021. As a point of emphasis, the company recorded less than $44 billion in total revenues from the Mac and iPad in fiscal 2016.”

“By 2021, the analyst’s calculations basically show the services segment being 20% of Apple’s total business. Additionally, the math puts its total revenue at more than $266 billion. That’s decent growth from the current street expectation of $227.68 billion in fiscal 2017 and $244 billion in fiscal 2018,” Maurer writes. “Adding $30 billion in gross profit could be huge to the bottom line.”

Much more in the full article here.

MacDailyNews Take: Yes, as Maurer writes, even without expected beneficial tax rate changes, Apple looks primed for double-digit EPS.

Apple’s performance going forward will shock the less-informed naysayers.

Note also that Apple’s fiscal 2016 revenue from Services alone ($24.348 billion) would stand at #155 on the Fortune 500 list of the largest U.S. corporations by total revenue, ahead of the likes of Duke Energy, Time Warner Cable, and Halliburton.

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Apple executives shift focus to services business – October 26, 2016