Jefferies says Apple iPhone business 'sufficient' to grow 'massive' Services biz
Jefferies analyst Timothy O'Shea noted that Apple (AAPL) plans to disclose its gross margin for the first time ever with its next earnings report and he believes the company intends to tell a "compelling" Services story, comparing the event to when Amazon (AMZN) first disclosed AWS margins in 2015. He estimates the company Services business has a 19% 5-year revenue CAGR with gross margin between 60-66%, which O'Shea notes is above the consensus margin estimate of 56%. While he lowered his FY19 iPhone unit sale forecast to 206M, which is below the 210M unit consensus, O'Shea added that he thinks Apple's iPhone business "still looks sufficient to build a massive, high margin, high multiple" Services business. He keeps a Buy rating on Apple shares, though O'Shea lowered his price target on the stock to $225 from $265.