Credit Suisse: Apple’s underappreciated services business could be growth engine

“One part of Apple‘s business is undervalued and overlooked: Services,” Kristen Scholer reports for The Wall Street Journal. “That’s according to Credit Suisse analyst Kulbinder Garcha, who argues in a recent note that the market may be underestimating what services are currently contributing and, more importantly, is underappreciating its growth potential and the “annuity-type” business it drives.”

“Projected strength in services is why Credit Suisse on Monday added Apple to its U.S. Focus List, which the firm considers its top investment ideas,” Scholer reports. “Apple’s price target was upped too to $150 from $140.”

“In Apple’s latest quarterly report, services accounted for just 8% of total revenues at roughly $6.1 billion. But the segment has been expanding, with sales from services up 26% from the same time a year ago,” Scholer reports. “Gross profits from Apple’s services could more than double by 2020, wrote Mr. Garcha. He estimates that gross profits, or sales minus the cost of goods sold, could rise to $33.7 billion that year, representing 29% of gross income. Already gross profits from services have grown to $14.5 billion a year today from $3.2 billion in 2010, he said.”

Read more in the full article here.

MacDailyNews Take: Over two months after Apple highlighted their services business for analysts, Wall Street finally starts to get it.

SEE ALSO:
Apple highlights services in search of Wall Street’s love – January 26, 2016
Apple reaps $18.4 billion quarterly profit, the largest ever recorded by a single public corporation – January 26, 2016
Apple beats on earnings; sets all-time records for revenue, net income, and EPS – January 26, 2016
MacDailyNews presents live notes from Apple’s Q116 Conference Call – January 26, 2016
Apple beats Street with all-time record quarterly earnings – January 26, 2016

3 Comments

  1. Apple’s growth will continue unabated – Bet on it.

    There are innovators and there are imitators…Find one company that leads the industry like Apple…crickets….

  2. It is about time…

    Should Apple goes more into it with a VR set and VR channels on AppleTV and… Oups… Way ahead of time.

    You heard first on MDN… LOL

  3. The service area will definitely accelerate. Apple music has a captive audience and it will expand its subscriber base. Every 1M subscribers contributes an additional $1B each year. What will be interesting is how much the costs will be and how much additional revenue are generated from other services and product purchases.

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