If Apple spun off its Services division as its own company, the business would be worth between $400 billion and $450 billion, according to a new analyst report.
To put that number in perspective, it’s more than twice the value of Netflix — and only $100 billion less than Facebook.
Apple’s Services division includes everything from the App Store and iCloud to newer offerings like the Apple News+ magazine subscription service and upcoming additions like Apple TV+ and Apple Arcade.
While Apple has been selling goods via the App Store and iTunes for years, the company recently pivoted to concentrate more heavily on Services as a growth metric.
The air is starting to clear
Aside from the staggering Services valuation, Wedbush analyst Dan Ives’ latest note to clients also suggests that Apple has stabilized after a turbulent 2018.
He notes that Apple’s “pricing hubris” with the iPhone XR hurt the company in China. However, Apple’s price cuts began the slow process of turning things around in the key Asian country.
Ives also says he expects “more significant price cuts on XR over the coming months.” He writes:
“In our opinion Apple continues to face a ‘code red’ situation in China and the right pricing strategy around XR and future versions will be key to putting a ring fence around the core installed base in the region. With lower priced competition from all directions with Huawei/Xiaomi front and center, Apple needs to make sure they do not lose any current iPhone customers and thus speaks to the more significant price reductions on the way in the region over the coming months ahead of the next major product cycle in September.”
Going forward, Ives pegs the number of users in China as a key measure of Apple’s future success.
This year’s iPhones should prove crucial, especially after many consumers stayed away from 2018’s iPhone upgrades. A combination of high prices, Apple’s iPhone battery replacement program and a lack of innovation caused the slowdown.
Ives suggests that Apple will report a “ho-hum” March quarter during next week’s earnings call. However, he predicts Apple’s Q2 2019 earnings will represent a step in the right direction after a “nightmarish December quarter.” In particular, he expects the aforementioned Services to do better than expected.
