“As of today, Apple is seen as a hardware maker and that means revenue from its products is viewed as non-recurring,” Ophir Gottlieb writes for Capital Market Laboratories. “But Apple’s tireless investment in R&D has put it on a path to a radical change in its business model which could change its valuation by nearly two-fold.”
“Over 60% of Apple’s revenue comes from the iPhone. Tack on an additional ~20% from Macs and Apple Watch and we’re looking at hardware company. It’s certainly the most successful one of all-time, but it is still carrying the anchor of a hardware company’s valuation,” Gottlieb writes. “When we compare Apple to all of the other mega cap technology firms, we can see its price to earnings near the bottom. And while a part of a price to earnings measure takes into account future growth, don’t tell us that Microsoft, with a price to earnings of nearly 40 compared to Apple’s price to earnings of 10, is some sort of bastion of mega tech growth. It isn’t.”
“We like to point out how Wall Street misses just about all of the true realities in technology, but we have to say, Goldman Sachs has been spot on with Apple,” Gottlieb writes. “Goldie continues to pound the table that Apple is shifting to a model that will drive recurring revenue rather than strictly hardware… The key here is the seismic shift Apple is making toward a revenue model that is recurring rather than one-time, and that means a radical shift in its valuation. CML Pro sees it. Goldman Sachs sees it. It’s just a matter of time before Wall Street sees it. ”
Read more in the full article – recommended – here.
MacDailyNews Take: Gottlieb gets it.
[Thanks to MacDailyNews Readers “Fred Mertz” and “Arline M.” for the heads up.]