“On May 1st, Apple announced its financial results for the last quarter,” Diesel writes for Seeking Alpha. “The company’s report was full of good news for its investors including but not limited to the fact that it beat estimates both on top and bottom lines.”
“As soon as Apple’s report was released, the first thing I looked at was the company’s service revenues. As an investor of Apple, this is very important to me because service revenues signify how much Apple can ‘milk’ its ecosystem beyond selling hardware,” Diesel writes. “Many hardware companies make money only once from their products (at the time of the sale transaction) while companies like Apple can make money again and again from a product even after it has been already sold (in some cases for years).”
“The ‘most important (and impressive) metric’ from Apple’s earnings report… [is one that] analysts often ignore and investors do not appreciate enough: ‘Service revenue per device.’ While Apple does not report on this particular metric, it is easy to estimate it from the other metrics Apple reports on,” Diesel writes. “The company generated $150 per each iPhone and iPad it sold during the quarter from its services. Apple makes more in service revenues per phone than many phone makers generate from their phone sales. This is unbelievably impressive.”
“At the current rate of growth, Apple’s service revenues will pass $50 billion within 5 years even if its iPhone sales growth slows down,” Diesel writes. “Services revenues are growing at a rapid rate and Apple’s growth will continue even if consumers’ iPhone upgrade cycle moves from 2 years to 3 years. In fact, if iPhone upgrade cycle moves from 2 years to 3 years, the company’s service revenue per iPhone will rise from $140 to $210. In other words, if people upgrade their iPhones, Apple makes money, if they hold onto their iPhones, Apple makes money again. Apple just makes money one way or another.”
Read more in the full article here.
MacDailyNews Take: Yup.
Apple’s services business is an unstoppable locomotive that, someday, even Mr. Market might fairly value. — MacDailyNews, August 9, 2017
SEE ALSO:
Apple Services: The nitrous in Cupertino’s profit engine – November 27, 2017
Apple’s Services (App Store, Apple Music, Apple Pay) business is an unstoppable juggernaut that’s still just gathering strength – May 3, 2017
Inside Apple’s massive services results – August 9, 2017
Misunderstanding Apple Services – August 7, 2017
Dispelling the Apple Services myth – May 3, 2017
Apple’s Services business: $7 billion in revenue last quarter alone – May 3, 2017
Apple’s Services (App Store, Apple Music, Apple Pay) business is an unstoppable juggernaut that’s still just gathering strength – May 3, 2017