Dear Reader,
Apple achieved 53.77 billion USD in revenue from its services business in the 12 months ending on 26 September 2020 out of 274.5 billion total revenue.
Actually, Apple's services business is the cloud services business of the company. Because the applications and music are stored in the cloud. Many Wall Street analysts propose that Apple uses its services business to keep users attached to its hardware sales from which it got 220.75 billion in revenue in the 12 months ending on 26 September 2020.
Yes, I think there is some validity to that argument. Apple's services, however, is a now very large business on its own. Apple's App Store acts as a platform for developers to post their applications and collect revenue from them. Basically, Apple is mustering the global technology talent on its platform to create tailor made application that entertain and increase productivity.
Apple is currently valued at 2.04 trillion USD by public markets. I estimate in 7 years Apple's intrinsic worth can actually reach that. Currently, I think Apple is worth around 1.4 trillion USD.
Leading central and commercial banks have created trillions of paper money which are chasing small number of sound investment opportunities which lead to technology stocks, bonds and real estate globally being grossly overvalued.
Apple, actually, different to Tesla, has a sound, extremely profitable underlying business which will remain viable after the coming new dot-com bust.
Nowadays all the computing is moving to the cloud. Yes, there will still be personal computers and company computing machines, but much of the computing will be done via the internet in cloud environment. Apple has long focused on the consumer, so it does not have the enterprise cloud offering of Amazon or Microsoft. But the consumers cloud of Apple is the App Store and it has proved and will continue to prove very powerful. Actually, the fact that Apple claims it does not collect users' data is a powerful advantage over Amazon, Microsoft, Facebook and Google. Technology companies all strive for monopolies like most other companies. Technology companies tend not to share their technologies and they build their own walled gardens. That is why there are so few very large technology companies mergers and acquisitions. Apple's competitive advantage over Amazon, Alphabet, Microsoft and Facebook is its privacy focused policy, great industrial design and close integration of hardware and software. All this creates an excellent environment for its cloud App Store business go grow a lot in the future.
Currently, however, Apple is overvalued by around 34 %.
Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".
Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.
Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!
Respectfully yours,
Petar Posledovich
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