Slow news day at The Motley Fool which says the rapidly growing Services division may be the key to Apple’s comeback.
While Apple’s product segments are generally straightforward, consisting of the iPhone, iPad, Mac, and “other products,” services are a little more cryptic. The category includes steady earners such as Apple Pay, Apple Music, App store sales, subscriptions, and others. Essentially, they’re all the sales Apple makes without selling an actual device.
Business as usual.
Apple struck gold with the iPhone, but it was inevitable that sales would decline eventually. It’s possible that the iPhone 7 will break through the way the iPhone 6 did, but the smartphone is going to reach a saturation point sooner or later, and it appears to be coming sooner.
With a P/E of 10 and a net cash hoard of $150 billion, Apple is being valued as a no-growth company. The potential of the services segment is essentially being ignored. Compared with some of its peers, that seems like a mistake.
It’s less of a mistake and more of ‘it doesn’t matter.’ Services revenue and profits pale in significance to the iPhone. Services won’t matter much to investors.