Analyst: Buy Apple shares for services growth

“Robert W. Baird is more optimistic that Apple will be able to increase its sales and profits from services after a big survey of consumers,” Tae Kim reports for Barron’s.

“The firm’s analyst William Power reaffirmed his Outperform rating for Apple stock, citing positive data from a recent survey of 1,500 U.S. consumers,” Kim reports. “The analyst noted 67% of consumers said they plan to purchase an iPhone versus around 60% in the past two surveys.”

Kim reports, “He predicts Apple’s services segment will generate 21% of the company’s sales and 37% of its profits in 2020, versus 19% and 33% this year, respectively.”

Read more in the full article here.

MacDailyNews Take: Will Power!

In the spirit of horrifically dated references, as The Fonz would say, “Exactamundo.”

Again, units don’t matter. There are only so many quality users on the planet. Keeping them happy, as every measure of customer satisfaction shows Apple has amazingly well done to date, is what matters. As long as the users buy apps on the App Store, subscribe to Apple Music, add iCloud storage, use Apple Pay, etc., they can replace their hardware with Apple hardware at their own pace.

iPhone has higher customer satisfaction than Android, meaning that Apple gains iPhone users from Android via normal churn as users graduate to real iPhones.MacDailyNews, January 21, 2019

Yes, the iPhone replacement cycle is lengthening, but with so many iPhone (and iPad) users and with customer satisfaction so high, it really doesn’t matter. The market is mature and there are only so many quality users on the planet. Apple has that market cornered. The types of people who’ve settled for Android aren’t likely to buy as many apps or subscribe to services. They want free. They’re not worth much after the sale. The iPhone knockoff peddlers like Samsung can have them.

This is, of course, Apple’s point with ceasing the reporting of unit sales. It’s the user base, the quality of the user base, and services that matter more now. That’s where the growth is and where it will be for many, many years to come.MacDailyNews, January 5, 2019

16 Comments

  1. Bleh… What has Apple become if the most exciting thing about the company is movie and music subscriptions?

    And yet, there isn’t anything else. There isn’t a single product in the current line-up that I would buy. Crap keyboards rule out all Apple notebooks for anyone like me who types a lot and the prices of Apple products today are absurd.

    When did Apple become disconnected from their users? The introduction of Final Cut Pro X was a wake-up call for me – I hated it and switched to DaVinci Resolve…

    My Mac Pro is fast but it’s a stupid design – it gets hot now but it’s almost impossible to keep free of dust. I can guarantee that Apple will replace it with something fast but just as impractical and ridiculously expensive. I won’t be a buyer…

    Nope. I’m not buying Apple – after nearly 20:years I’m looking for value elsewhere. And by that I mean products, not shares, and I’ll never ever buy their services.

    1. Apple’s claim has been to revise existing tech into a superior form. One could say the iPh still holds that place, but I’d say barely…esp if the privacy benefit is removed. The Apple Watch, for sure is consistent with that historical reputation. What else? Not much.

      The verdict is out on “content.” Mr. Cook doesn’t exhibit the revolutionary mindset that gives me confidence he’ll deliver better content, or in a better manner.

    2. “The jury is out on Apple original content. This is a game Netflix owns and barely makes a decent profit on.”

      But but but NFLX is hitting the roof which surpassed AAPL. That’s all what it counted.

  2. Profit or not, Netflix is valued by Wall Street far higher than Apple will ever be. Netflix is at least making big investors rich by way of share gains. With Apple, I can only count on dividends.

    Too many analysts are in doubt about Apple Services growth without increasing iPhone sales. I don’t think most big investors are sold on Apple Services giving huge returns, but maybe it’s too early to draw any accurate conclusions. Netflix is spending 8X the amount on content than Apple, so Apple is working at a huge disadvantage if it takes plenty of money to increase content.

    I’m looking at Microsoft’s share gains and I’m scratching my head as to why Microsoft is outperforming Apple so easily. Apple is so tight-fisted when it comes to growth-spending, so immediate gains aren’t apparent. I can only hope Apple knows what it’s doing in terms of generating revenue and profits. I sure don’t see much future growth in the smartphone device market.

    1. Um, dude, you just pull stuff right out of your nether regions. As of close of business today, the market values Netflix at $159.3 billion and Apple at $822 billion. To do the obvious math, Apple is currently five times as valuable as Netflix.

      1. Services will never be commoditized?

        There’s already a ~dozen companies that I can choose from just for registering a domain…it ain’t just Network Solutions anymore.

        Ditto for ISP to host a domain.
        Or Cloud/Dropbox integration.

        Even for more advanced ‘big data’ services like AI: if you don’t like Microsoft Azure, you can go to Google or Amazon.

        And the deployment of wireless 5G may finally be the major disrupter to CATV service providers for household internet to bring real competition to that market (why else do you think that the telephony companies have backed off of ‘final mile’ fiber?).

        1. services are subscription . monthly revenue from potentially 10’s of millions.
          even cable channels see the writing on the wall . cable package includes CBS but in addition to that content, you can subscribe to CBS All access with additional CBS content.

          1. True, CATV is “seeing the writing on the wall” … but its because they’re losing subscribers.

            The trend for consumers to ‘cut the cable’ by going back to free OTA service has been a growing trend for the past several years: as per digitaltrends since 5/2010, the percent of OTA homes has grown by 48%, from 9% to 14%.

            The industry’s counter-trend strategy has been to try to secure unique content which lower cost competitors aren’t able to provide and serves as a differentiator…because otherwise, you’re just a dumb pipe and its a race to razor thin profit margins of a simple commodity product.

  3. The Devil is in the Details – – because what’s not transparent to investors is just what percentage of “Services” is from customers who are paying Apple for something specific (eg, Music, iCloud, etc) and how much is coming from Apple paying Apple from a “tax” imposed on Hardware divisions for integration of Services-based products (eg, Siri integration onto iPhone, Mac, etc).

      1. Clearly, you’re not an APPL investor who’s actually been paying attention to what Apple has been saying on their Investor calls & reporting to the SEC on their 10-K form.

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