Apple tries to be desirable and predictable

Apple's shift from devices to less tangible services has pushed up its valuation.

As Apple has shifted toward more services, its desirability has risen.

n 2018, the company’s enterprise value was equivalent to 3 times estimated revenue for the year ahead.

Today, at $2.5 trillion including net debt, Chief Executive Tim Cook presides over a firm valued at 6 times sales.

Analysts assume Apple will sell about $300 billion in iPhones and other objects this year.

While the devices have changed, the business hasn’t much, so assume that chunk of business is worth around 5 times sales or around $1.5 trillion.

Deduct that from Apple’s enterprise value, and investors are pricing the services business at $1 trillion, around 10 times forecast revenue.

That’s more than Microsoft, which trades at 8 times and whose revenue growth is similar and remarkably consistent.

Apple said on Feb.2 that revenue for the quarter ending Dec. 31 was $117 billion, a decrease of 5% from the same period the year before.

The iPhone maker said it faced significant supply constraints in the quarter.

Covid-19 lockdowns in China hampered the production of iPhones. Services revenue rose 6% to $20.8 billion.