Apple Provides Services Segment Update

Technology behemoth Apple Inc. (AAPL) gave a sneak peek into its services business performance for the year gone by. Recently, Apple hit the $3 trillion market capitalization mark for a brief period, making it the first to reach the milestone. In 2021, its shares gained around 35%. APPL shares closed at $172.19 on January 10.

2021, the Year in Review

Apple is home to many popular apps like Apple Arcade, Apple Music, Apple TV, Apple Fitness+, Apple News, Apple Books, and so on. All of these apps have attracted a huge fan base, generating millions of dollars in revenue for the iPhone maker.

According to the company, it had more than 745 million paid subscribers in 2021, growing approximately 6.5% compared to the last year’s figure of 700 million.

Apple’s App Store connects more than 600 million people each week across 175 continents. This has led to developers earning more than $260 billion in sales since its launch in 2008.

In 2020, Apple paid more than $200 billion to developers, and in 2021 alone, it paid more than $60 billion to app store developers, a new record for the developers. The holiday season between Christmas Eve and New Year’s Eve witnessed double-digit growth from last year, as shoppers spent more than ever before. The figure implies burgeoning growth for the company’s App Store sales, which form a part of its second important revenue-generating segment, “Services”.

Apple Arcade, the company’s game library has also expanded, providing more than 200 million premium, family-friendly games to gamers of all ages. In 2022, gamers can look forward to its new releases including the “Nickelodeon Extreme Tennis” and many newer weekly content updates.

Apple Music offers a music catalog of more than 90 million songs all available in “lossless audio”. In 2021, the company also launched a new Voice Plan, a subscription service tier powered by Siri for a monthly fee of $4.99.

Apple TV, which streams over more than one billion devices, will feature all-new Apple Originals in 2022. Last year, the company launched its next-generation Apple TV 4K with Siri Remote available in 24 countries and regions, with the flexibility to communicate with Siri in native languages.

Apple News is one of the most viewed news apps and last year, it launched local news experiences in six more cities.

Apple Books offers more than 8 million books and audiobooks for readers to read and listen to on their favorite Apple devices. The service has more than 100 million monthly users.

Apple Pay expanded to nine more markets in 2021, and is now available in almost 60 countries and regions, working alongside 9,000 banking partners globally.

Apple’s digital Wallet has seen its fan base increase in 2021, with people using 30 million NFC tickets in the Wallet for various events across the U.S. and Canada. The tap and pay option is available on the iPhone and Apple Watch in more than 200 cities globally.  

Company Comments

Eddy Cue, Apple’s Senior Vice President of Services, said, “Apple’s world-class portfolio of services proved essential in 2021, as people worldwide sought new ways to keep entertained, informed, connected, and inspired.”

Eddy added, “With over 745 million paid subscriptions, Apple continues to connect the world’s developers, artists, and storytellers with users across more than a billion devices, delivering powerful tools, content, and experiences that enrich their lives in profound ways every day.”

Wall Street View

Yesterday, KeyBanc analyst Brandon Nispel reiterated a Buy rating on the stock with a price target of $191, which implies 10.9% upside potential to current levels.

Nispel is bullish about Apple’s U.S. hardware growth for the December 2021 quarter, despite the supply chain constraints. In international markets as well, the analyst sees many tailwinds for growing Apple hardware sales including low penetration, rising consumer affluence, and 5G upgrades.

One of the best FAANG stocks, Apple commands a Strong Buy consensus rating based on 21 Buys, 4 Holds, and 1 Sell. The average Apple price target of $175.28 implies 1.8% upside potential to current levels.

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