Analyst Daniel Ives, lately of GBH Insights, says Tim Cook is sitting on a gold mine.
From a note to clients that landed on my desktop Thursday afternoon:
Cook & Co. Focused on Services Gold Mine; iPhone Cycle Humming—Initiating at OP: With September Street numbers and FY19 set up well heading into a potentially robust iPhone product cycle along with a massive capital return strategy already in place as another tailwind, we continue to believe Apple shares are compelling over the coming year despite the recent run.
In particular we continue to believe the “high octane fuel” from the services business that is on a trajectory to be a $50 billion annual revenue stream by 2020 speaks to the stepped-up monetization of Apple’s unparalleled installed base that is front and center for Cupertino (and its investors) over the coming years.
Our sum-of-the-parts valuation on AAPL translates into a price target of $310 with our services business segment valuation between $400 billion to $450 billion and the rest of Cupertino’s core iPhone franchise resulting in a valuation that has clear upside from current levels in our opinion as Cook & Co. further execute on their long term consumer vision.
In a nutshell, we ultimately believe AAPL’s valuation can approach the $1.5 trillion level based on our analysis of the monetization potential of its unparalleled consumer installed base over the coming years coupled by further multiple expansion around the services business.
Initiates coverage with Outperform rating and $310 price target.
My take: The last time I heard from Ives, two and a half months ago, he had a Highly Attractive rating on Apple and a price target of $245.