Credit Suisse sees 1.3 billion iTunes user accounts in 2018; ups Apple price target to $96

“Continuing a trend of Apple (AAPL) price target increases, Credit Suisse’s Kulbinder Garcha today reiterates a Neutral rating on the shares and raises his price target to $96 from $85.71, writing that the company’s services are leading to an ‘enviable portfolio of iServices,'” Tiernan Ray reports for Barron’s. “Garcha thinks the offerings ‘combined with its multi-product compute offering, creates a sustainable competitive advantage’ and will allow the company ‘an annuity stream from its valuable 800mn installed base.’ Garcha thinks the most immediate change is that Apple will move heavily to subscription-based music with the recent acquisitions of Beats.”

Ray reports, “Rather than being disrupted, Garcha expects Apple to grab hold of the streaming music trend, bundling it with its devices. ‘We believe Apple is likely to further accelerate the music subscription market’s development via its recent purchase of Beats Music. Apple has an iTunes installed base of around 800mn users – providing a global distribution platform and, crucially, a virtually frictionless payment system. It seems logical then to expect Apple to include Beats Music in a software upgrade to its entire global installed base, and/or bundle a free/discounted subscription for a fixed period with new hardware at the point of sale. We would regard both of these developments positively for the whole industry. With iTunes stores in 123 countries, 425 retail stores, App stores in 155 countries and an army of 800mn users, Apple could very quickly scale a music streaming service, given its existing reach and music deals. Indeed, while the iTunes Music contribution alone is a relatively small percentage of their revenues by our estimates, we believe its long relationship and the usage of music in its products remains a core feature set, and is an area where the company will remain committed.'”

Garcha continued: Apple has built an entire portfolio of services. Apple has built a portfolio of services that range from the App Store, iMessage, iCloud, iBook store and now HomeKit and HealthKit. Additionally, these services are increasingly integrated across its major hardware portfolio of Mac, iPhone and iPad. We believe that Apple’s vertically integrated structure across hardware, software and services, and across multiple products results in several strategic advantages versus its peers. First, it leads to high quality levels of integration in a manner that we argue rival platforms such as Android and Windows lack. Second, seamless availability of services and software competency results in high levels of usage (whether looking at mobile browsing, mobile commerce, or data usage, iOS devices materially outperform their installed base of smartphone units by a factor of four) which makes the company an attractive partner for new ecosystems. Third, given many of Apple devices cover all aspects of its consumer’s lives from TV consumption to mobile telephony to PC’s, the company owns a Big Data advantage that few of competitors have, which we believe is useful for new businesses and product improvement. Finally, it provides a platform for new services and products ahead.

Read more, including how Apple gets to 1.3 billion iTunes user accounts, in the full article here.


    1. Yup!

      18,000.00 by 18 dollar per share and pre split from the nineties.

      1,000 purchased, split to 2,000 and the new split of 7 to 1 = 14,000.

      14,000 x 96 = 1.344 million with dividend. Sweet!

  1. This article makes no sense. They’re suggesting that iTunes accounts will grow from 800 Million today to 1.3 Billion in just 4 years.

    Ok, that’s pretty optimistic, but what doesn’t make sense is how they reconcile those numbers with predictions on other iTunes related devices.

    During the same time period:
    iPhone sales are supposed to drop by 18 million units per year.
    iPad sales are supposed to drop by 3 million units per year.
    iPod sales are supposed to drop by 10 million units per year (to 0).
    Mac sales are supposed to drop by 3 million units per year.

    Overall net income drops by $3 Billion per year.

    How does Apple add 500 million iTunes users in 4 years when device sales show such a significant drop during the same time period?

    Oh… Beats! People will subscribe to Beats even though they’re abandoning Apple platforms? Ok, weird, but that still doesn’t make sense according to their own math:

    They’ve got an increase of $7 Billion in iTunes related revenue between now and 2018. However, the average per user is still $22, remaining constant through the same time period. And increase of 500 million users while maintaining the same $22 average would be an increase of $11 Billion in revenue.

    Some prankster is pasting RAND() into the cells of their spreadsheet.

    Seriously, you’re predicting an increase of half a billion iTunes users, virtual payments to take off, and music subscriptions to take over, all within 4 years, but you’re still maintaining a $96 “neutral” stock rating???

  2. > Credit Suisse’s Kulbinder Garcha today reiterates a Neutral rating on the shares and raises his price target to $96 from $85.71…

    There “analysts” should be called “historians.” They seems to “predict” what has already happened, and raise their targets accordingly to be the current price plus about 5% (if the stock is headed up).

    Also, I never understood the “Neutral” (or “Hold”) rating. That’s just a cop-out for being unwilling to commit, which is worthless. Either recommend Sell or Buy. What does “Neutral” mean? If you have it, keep it, but if you don’t have it, don’t buy it…? It won’t go up much, but it won’t do down much either…?

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