A proprietary survey shows iCloud, AppleCare and other Apple services climbing the S-curve to an inflection point.
From a note to clients by Katy Huberty that landed in my inbox Thursday:
We think the market underestimates both growth and value impact of Apple’s Services business. With a maturing, more engaged iOS user base and broadening portfolio of Services, we believe Services represents the key growth driver for Apple over the next 5 years.
Overall Services and specifically iCloud & AppleCare are approaching key 20% inflection point; a level of penetration historically associated in technology with higher growth velocity ( Exhibit 4 & Exhibit 5 ). App Store, the service with highest penetration today, experienced a growth acceleration when penetration topped 20% and we expect other services to follow the same path.
Maintains Overweight rating, raises price target to $253 from $226.
My take: With her survey and her S curves, Huberty sees Services revenue growing 20%+ per year for the next five, well above the Street’s consensus.