“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.
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