“As Apple approaches a market cap of $1 trillion with a return on shareholder’s equity of 36.1 percent in 2017, it can be thought that Apple’s management is doing a lot of things right… enough things that other corporations should be following them,” John M. Mason writes for Seeking Alpha. “Apple’s success is not just tied to the physical goods it produces. Oh, that is an important part of what they do, but they have gone beyond just the production of goods to show how, in this modern world of information technology, different facets of ‘information’ can be tied together to make something really substantial… and really profitable.”
“Tim Bradshaw writes in the Financial Times about Apple’s ‘second-largest source of revenue… its services business composed of revenues from items like App Store downloads, iCloud storage and Apple Music subscriptions, among others.’ These areas, altogether, ‘brought in more than $9 billion in the last quarter, up 31 percent on the year.’ And, they are ‘a model of consistency compared with the feast-or-famine performance of the iPhone. Since 2006, it has grown at an average rate of 23 percent, year-on-year… Services revenues have doubled in four years,'” Mason writes. “Tim Cook, Apple CEO, and his CFO Luca Maestri, have gone on record as setting a target of $50 billion for the division by the end of 2020.”
“The point is that Apple is creating the modern corporation and is showing others that it is not just the production of a product that is all that is needed,” Mason writes. “The important thing is that these ‘modern’ corporations are using ‘information’ to tie all things together.”
Read more in the full article here.
MacDailyNews Take:
It takes hardware plus software plus services to make a killer product. — Tim Cook
SEE ALSO:
Apple gets downgraded on concerns over services business – May 30, 2018
Morgan Stanley: Buy Apple shares on the ‘emerging power’ of its services – May 24, 2018
Apple as a service: Services offer growth, visibility, and profitability – May 15, 2018
AAPL’s paradigm shift – May 11, 2018
Apple Services: The nitrous in Cupertino’s profit engine – November 27, 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
Wall Street basically loves three things about companies with high P/Es. How well they can harvest user data. How large a cloud business they have. How much money they’ve invested in AI research. That’s Wall Street’s guarantee that Amazon, Google, Facebook and Microsoft will all outperform Apple.
Apple doesn’t quite fall under any of those beloved categories. All those categories I’ve mentioned are said to have unlimited growth potential as far as Wall Street is concerned. Apple is still seen as a doomed company with greatly limited iPhone market growth. Just today, it was said that Apple’s services growth was highly over-rated. In my opinion, that’s just how Wall Street always sees Apple.
I’m not concerned if analysts want to push Apple’s stock price down because it makes it easier for Apple to buy back more stock at a lower price. I’m into Apple for long-term dividends, so Wall Street’s view or analyst’s trash talk doesn’t mean much at all.
You do not have to believe Wall Street’s current mindset. You just need to understand it well enough to take advantage of its irrationality.
Wall Street enjoys chasing different fads over the years, claiming that the fundamental rules and risks have somehow changed. Many of you might recall the “dot.com” boom of the late 1990s and the crash of the early 2000s. During that period, Wall Street “experts” decided that “click” volume on the web was the key to corporate success, propelling some companies to outrageous valuations and P/E multiple and anticipating outsized growth in revenues and profits that never materialized. Investment companies and wealthy investors cashed out quickly and started looking for the next great investment philosophy while retirement portfolios and individual investors were largely left holding the bag.
The stock market is not rational – it never was and it never will be. You have to be crazy like Captain Jack Sparrow to have a hope of predicting it. But you can spot the trends and avoid the worst of the losses, in many cases.
Without in house hardware, software(OS) and industrial engineering ability, you have no chance in whatever AI really becomes in the future. Google, Facebook, and Amazon at dead in that area. Apple’s work on their in house CPU chips say it all.
But Intel is very alive in CPUs and MS in software. And if you’re discounting the other three in software you’re very sadly mistaken.
Google and Amazon are very well positioned on the software front, and don’t forget that Facebook owns Occulus.
Not rooting for any of them, rather rooting for all of them. I’m a consumer, not an investor.
Apple is incapable of manufacturing an incandescent light bulb. Everything they sell is manufactured under contract.