Evercore Pleasantly Surprised by Apple Services Survey
23 JUNE 2022 - While Bernstein’s Sacconaghi and The Wall Street Journal’s Gallagher may pooh-pooh Apple’s Services side, Evercore analyst Amit Daryanani sees a lot happening in it. Apple 3.0 ran part of a note he wrote Wednesday, wherein he said a recent survey of over 3,000 smartphone users “surprised to the upside…” Paraphrasing some of his key points:
Services ARPU [Average Revenue Per User] in the US is ~$108, better than Evercore’s global estimate of $81, though he does point out that people from the US spend like people from the US.
He and his expect Average Revenue Per User to grow at a 17% Compound annual growth rate through FY26, with “plenty of runway” for Services like Apple Music, Apple TV+, Apple Arcade, and so on.
While Apple Pay adoption is “still low relative to international markets,” Evercore thinks products like Apple Card and Apple Pay Later will boost that.
Apple TV (one assumes he means Apple TV+) stands to pick up more users/subscribers as Apple adds sports offerings.
Evercore expects AppleCare to keep growing if/as the cost of Apple gear moves higher.
If there was any negative in his takeaways, it was tied to Apple Music. Quoting that point:
Music – while music adoption remains respectable at 22%, it’s notable that more iPhone users prefer SPOT (28%) vs. Apple Music (22%). Shifting this via. bundling could be beneficial for AAPL…
Mostly though, the survey was more positive than the firm expected, increasing the team’s “confidence that Apple can continue to grow the [Services] business at a mid-teens rate.”
Evercore has an “Outperform” rating on Apple shares. The firm’s price target on the shares is $210.
