14 DAY TRIAL // Apple has long been considered to be the company with the biggest chances worldwide to break the $1 trillion market cap, and now an analyst forecast predicts this could happen rather sooner than later.
Morgan Stanley analyst Katy Huberty said in a note to investors that Apple could hit this historic milestone not thanks to the iPhone, which continues to be the company’s best-selling product, but following the massive growth of its services division.
The Services unit, which includes the App Store and iTunes, has indeed recorded a massive growth lately, reaching no less than 270 million customers in the last quarter.
“Services is fast becoming Apple’s primary growth driver,” the analyst explained. “Apple revenue grew at an 8 percent [compound annual growth rate] over the last five years, driven in large part by sales of its flagship iPhone. But as device replacement cycles extend and device installed base growth slows to single digits, we believe Services will pick up the growth baton and account for ~67 percent of Apple revenue growth over the next five years.”
iPhone’s role in this performance
The rapid growth of Apple’s Services will continue in the coming months and will propel the company towards the said $1 trillion market cap.
“We estimate that in the last 12 months, users have spent over $40 billion in the App Store, of which Apple collects a roughly 30 percent cut, implying the App sore generated slightly more than $12 billion of net revenue for Apple in the last 12 months, up 29 percent year-over-year,” Huberty added.
Without a doubt, however, even if the iPhone itself won’t be the main catalyst of this major growth, it’ll still be a decisive factor. iPhones are pushing customers towards the services that are behind Apple’s success these days, and the upcoming trio of models, which could include a low-cost device likely to sell in high numbers, is very likely to speed up this progress.
Huberty has set a price target of $214 for Apple shares, which means that if touched, it could push the company to $1.204 trillion valuation.