How to confuse a function with its first derivative.
From “The Risks to Apple Are Rising, So Why Are Investors So Bullish?” in this week’s issue ($):
[Apple’s] stock now trades at 16.4 times projected earnings for the next 12 months, well above its five-year average of 13.7 and near a five-year peak of 17.7. Investors have been paying up for the stock on the idea that Apple is moving away from its hardware focus toward a more predictable services- and software-driven model.
The problem is that Apple’s services business remains a question mark and could still disappoint. The segment actually missed analyst estimates by $200 million in the June quarter, with sales up 13% year over year, versus 16% in the prior quarter.
Moreover, KeyBanc Capital Markets Andy Hargreaves expects Apple’s services growth rate to subside over the next year. “Services business is tied to growth in the user base,” he says. “And the user base is definitely decelerating.”
My take: Decelerating, sure, but still growing (see interactive chart below; not seeing? Try here).
So what, again, is Apple’s Services “problem”?
See also: How Apple plays the Ecosystem Game