Evercore ISI said that Apple investors underestimated the value of the Apple service business. By 2024, the sector’s revenue is likely to more than double.
Evercore ISI analyst Amit Daryanani wrote that the sector ‘still remains an underappreciated growth lever’. He also said that these products ‘should drive up ARPU (average revenue per user) and maintain service growth.’
Also Read: Apple Would Market A Single Subscription For All Its Services In 2020
In 2019, Apple sped up its push into subscription-based services. It was offering new services such as video streaming, gaming, news and credit cards. Add those ventures to the more established operations in music, cloud storage, apps, and service plans, and you have the makings of a very big business—may be larger than investors currently expect.
Evercore reiterated its overweight rating on Apple stock and a target price of $360 per share, according to its calculations. So before fiscal 2024, Apple service revenue may grow at a continuous compound annual growth rate of 19%. It will bring service revenues for the fiscal year to over $100 billion. Data show that in 2019, Apple services business revenue was about $46.3 billion, accounting for nearly 18% of the company’s total revenue.
By the way, Apple shares rose 0.8% in premarket trading. The stock is up more than 80% from its June low.
In addition, KeyBanc Capital Markets said on Wednesday that demand for Apple’s iPhone 11 in December was ‘strong’. And that even with limited promotions during the holiday season, the iPhone 11 sales ‘still met store expectations’. In this sense, limited promotions ‘usually are positive leading indicators of healthy demand’.