Beyond the iTunes music store.
With net revenue from services alone of $21.2 billion, Apple is now one of the largest internet services companies on the planet.
So reiterated Credit Suisse's Kulbinder Garcha in a 64-page chart-filled "deep dive" for clients in which he raised his Apple price target to $150 from $140.
From his slide deck:
Click to enlarge.
See also Wall Street has Apple's margins all wrong.
On Wedensday, Asymco's Horace Dediu and Creative Strategies' Ben Bajarin will be taking their own deep dive into Apple services. See here.
Of course, there may come a time when Apple can’t afford to give all these goodies away completely free with a purchase, for example if people stop upgrading their products because the older ones, having been incredibly well built, are “good enough”. But looking at Apple’s massive net income, let alone the clearly continuing net income growth, that day is a long way off. And even after it arrives, it seems obvious to me that customers will tolerate a small increase in the Apple Theme Park Concessions Stands.
Bottom line: If the massive P/E’s of companies like Amazon can be justified on the basis of “recurring income”, then, since Apple has all the revenue growth of an Amazon, all the recurring revenue of an Amazon, and at least four things Amazon doesn’t have, that is, a huge cash reserve, high earnings per share, stock buybacks, and a decent and still growing dividend, how much MORE should Apple be justified those same P/E’s?
Yeah. AMZN with a P/E of 12 – or APPL with a P/E of 477. Better yet, split the difference and give them both a P/E of about 250.
Wowsa! AAPL at over $2,500/share! Now THAT would be a valuation I could support!
Sacto Joe
That is, it is “valuing” not on value but on “momentum”. And that way, folks, lies madness and ruin for many stockholders.