With several slowing products and no grand release in sight, Apple has shifted from an innovative giant to a luxury tech brand that is currently trading at a reasonable price with a PE multiple of only 14. Their services segment is doing great since their is an installed base of Apple iPhones to reach nearly a billion by next year.
Apple’s services category includes: Digital Content and Services, Apple Pay, AppleCare, licensing and other services, including iTunes, the App Store, AppleMusic and iCloud. Tim Cook said that Apple has up to 300 million paid subscriptions and this number grew 60% over last year. Apple receives significant revenue from the app store because companies must pay 30% to Apple for using their platform.
From a short-term perspective, I think it’s likely that shares will experience some support near the $170 per share level. I will be looking for an entry point for bullish call options with an expiration at end of December and a strike price of $175.
Longer term, to buy more shares of Apple, I will be waiting to see a new growth product and not only service growth. Eventually, if you aren’t selling more products – your services will falter.