2 months ago
Apple: Buying Netflix Their Best Bet To Close Services Gap, Says Credit Suisse
In the latest in the debate over Apple's (AAPL) services business, Credit Suisse analyst Kulbinder Garcha today reiterated his Outperform rating on the shares, and raised his price target to $170 from $160, after doing what he calls a "deep dive" on the business and concluding the Street is underestimating both the profitability and the growth potential of services. The big picture is that with much higher profit margin, services can boost Apple's overall corporate gross profit margin: We believe that Services enjoys a GM of ~70% and already its growth has absorbed iPhone GM pressure, currency fluctuations and rising commodity prices. With a current base of 650 million or so active users, and 1.1 billion active devices, Garcha thinks the company can increase its installed base to 1.5 billion devices in use by 2020, and charge them for more stuff as it commands "rent" from a loyal and affluent base that on average owns more than one Apple device: We ran two proprietary surveys, one for Emerging Markets, and one within the U.S. Of the almost 17,000 total respondents (over 15,000 in Emerging Markets and over 1,700 in the U.S.).