AAPL - Apple Inc
AAPL - Apple Inc. designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players to consumers, small and mid-sized businesses, education, and enterprise and government customers worldwide. The company also sells related software, services, accessories, networking solutions, and third-party digital content and applications. It offers iPhone, a line of smartphones; iPad, a line of multi-purpose tablets; and Mac, a line of desktop and portable personal computers.
The company also provides iLife, a consumer-oriented digital lifestyle software application suite; iWork, an integrated productivity suite that helps users create, present, and publish documents, presentations, and spreadsheets; and other application software, such as Final Cut Pro, Logic Pro X, and FileMaker Pro. In addition, it offers Apple TV that connects to consumers' TV and enables them to access digital content directly for streaming high definition video, playing music and games, and viewing photos; Apple Watch, a personal electronic device; and iPod, a line of portable digital music and media players. Further, the company sells Apple-branded and third-party Mac-compatible, and iOS-compatible accessories, such as headphones, displays, storage devices, Beats products, and other connectivity and computing products and supplies.
Additionally, it offers iCloud, a cloud service; AppleCare that offers support options for its customers; and Apple Pay, a mobile payment service. The company sells and delivers digital content and applications through the iTunes Store, App Store, iBooks Store, Mac App Store, and Apple Music. It also sells its products through its retail and online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers. Apple Inc. was founded in 1977 and is headquartered in Cupertino, California.
Apple Inc.’s customers will nearly double their spending on the company’s services offerings, such as Apple Pay and Apple Music, in the coming years, an analyst predicted Monday, meaning billions more in profit for the iPhone maker.
Credit Suisse analyst Kulbinder Garcha conducted an analysis into Apple’s business and reported that investors might be underestimating and underappreciating the growth potential of services such as Apple Pay, Apple Care, Apple Music and iCloud.
Garcha estimates that gross profit related to services has grown to about $14.5 billion from $3.2 billion in 2010, and sees that more than doubling to nearly $34 billion by 2020. The amount each user spends on such services is expected to skyrocket by 85% to $113 a year by 2020 from roughly $61 today, helping to lift its share of Apple’s total profit to 29% from 15%—a number that could rise if Apple were to launch a TV service.
“It would be naive to assume that Apple will not enter the TV streaming business at some point and capitalize on more opportunities in the gaming segment as well,” Garcha said.
Garcha upped his price target on the stock to $150 from $140, reiterated a buy rating and added the stock to the bank’s “U.S. Focus List” of top investment ideas. Shares of Apple rose 1.6% to $111.75 in afternoon trade, pushing the price up 6% over the last three months, vs. a 4% increase for the Dow Jones Industrial Average.
Apple has relied on strong hardware sales, notably the iPhone, for the vast majority of its growth in the past few years. The iPhone accounted for 66% of Apple’s total revenue in fiscal 2015. However, saturation in the hardware market has increased the need for additional sources of revenue.
Analysts expect Apple to sell 50 million smartphones in the fiscal second quarter, which would mark a year-over-year decline—the first ever for the product—from 61 million in the year-earlier period, according to FactSet. Total revenue related to iPhones is expected to shrink to $33 billion from $40.2 billion last year, and Garcha believes the iPhone business will contribute just 38% to gross margin by 2020.