Apple’s share price will soar predicts Goldman Sachs as it places it on “conviction” buy list because it’s no longer a hardware stock – it’s “Apple-as-service”
Shares in Apple could hit dizzying new heights, says Goldman Sachs, which has added the superstar tech stock to its "conviction" buy list.
Analysts said the market will increasingly see the California company as a source of recurring revenue rather than simply a transactional seller of one-off devices, citing TV, Music, and Pay, as a "significant multi-year opportunity" after the launch of services in these areas this year.
".. the market views it as a “hardware” stock – a transactional model with limited recurring revenues and with visibility that extends only to the next product cycle. We expect that over the next year, the focus will shift from unit growth (which is slowing given a maturing smartphone market) to installed base monetisation and recurring revenues (“Apple-as-a- Service”). Apple’s model has already tilted that way with its new iPhone 6s installment plans, and we see the upcoming TV service as a powerful next step," it said in a note.
The already huge number of people with iPhones means there is a ready made group of people willing to splash out on subscription services, and it calculates average revenue per user (ARPU) currently stands at $42 per month.
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But this could soon grow to as much as $153 with the uptake of more than one device and subscription as its user base continues to grow. Goldman predicts Apple's total user numbers to grow from 500m to 700m.
That could send Apple stock to new record highs of $163 per share within the next 12 months and taking its market capitalisation to around $900bn, surpassing this year's previous all-time highs of $134 per share and a more than $775bn market cap.