Apple Tries To Be Predictable And Desirable

The popularity of Apple has increased as the company has switched its focus toward new services. Producing recurring, predictable, fee-type revenue is one of the keys that companies like General Electric (GE.N) and Goldman Sachs (GS.N) know is necessary to achieve a better stock-market valuation.

The same may be said about Apple (AAPL.O). The move away from physical products and toward less tangible services, which accounted for 18% of the sales in the most recent quarter, has contributed to the company’s increased valuation of $2.4 trillion. However, not all of its services contain the same amount of essential information.

Apple’s Popularity Is Soaring

According to Refinitiv, the enterprise value of the company in 2018 was comparable to three times the revenue that was anticipated for the following year. Tim Cook, the Chief Executive Officer, presides today over a company that is valued at 6 times sales and is worth $2.5 trillion when net debt is taken into account.

Dissecting its market value into its component elements is one strategy for making sense of the situation. The consensus among industry experts is that Apple will rake in approximately $300 billion in revenue from sales of iPhones and other products in 2018.

Since the gadgets haven’t changed all that much but the business has, we can conclude that a portion of the company is still worth roughly five times the sales it generates, which is still much over Apple’s historical average and comes out to about $1.5 trillion. If we deduct that from Apple’s overall enterprise value, we find that investors are placing a value of $1 trillion on the company’s services segment, which is approximately 10 times the expected revenue.