As Apple’s market cap approaches $1T, it begs the question; can shares move higher? We believe the Apple story is well positioned for future appreciation based on a longer-term, more sustainable investing paradigm. The recent move higher in shares of AAPL is likely an early reflection of this emerging paradigm shift.
● Our perspective that the iPhone will be a stable business for the next few years will be the most controversial of the four pillars to our Apple as a Service thesis.
● Based on the size of the active iPhone install base (~805M), along with a stable replacement cycle and iPhone retention rates above 90%, we believe the iPhone business can continue to grow units and revenue in a predictable (0-5%) range over the next several years.
● The stable iPhone business is the foundation of a thriving services business.
● The combination of stable iPhone and >15% Services growth can generate $40-$50B annually that they can return to investors.
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