Morgan Stanley thinks Services will help Apple hit $1 trillion again

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Services are a growing focus for Apple.
Photo: Ste Smith/Cult of Mac

Apple shares have rebounded some from the company’s holiday season slump, but its $787.6 billion market cap has a way to go before it’s back at the $1 trillion level it hit last summer.

Analysts at Morgan Stanley have a suggestion for turning things around, however. They think that Apple’s Services division could see Apple once again take its place in the exclusive trillionaires club.

Specifically, the investment bank and financial services company thinks that Apple should launch a media bundle. This would consist of its video streaming content, Apple Music, and its upcoming repackaged Texture news app, offering Netflix-style access to magazines and newspapers. According to CNBC, Morgan Stanley’s Katy Huberty thinks that:

“The media bundle could add about 2 percentage points annually to services revenue growth through 2025, helping to drive a 5 percent revenue and 12 percent earnings per share (EPS) annual growth rate through 2023.”

This isn’t the first time Morgan Stanley has shown faith in Apple’s Services division. Last year, before Apple passed the $1 trillion valuation, Huberty suggested that Services growth could be what pushed Apple over the finish line.

An Amazon Prime-style service?

An Amazon Prime-style Apple package would definitely be something I’d be interested in — although it would be interesting to see how Apple marketed the proposition.

Amazon Prime offers “free” one-day delivery as its primary benefit, and then tacks on other services to sweeten the deal. In Apple’s case, Apple Music, Apple original content, and Apple News would all be worthy of a monthly subscription fee.

Would Apple offer a modular system, in which users get a discount for signing up to all three services, but can also buy them individually? Would people be more likely to sign up for a package that covers everything than they would for just music, TV and movies, or news? And, finally, if one service was prioritized, what impact would this have on the focus on the other two branches? There are plenty of other questions we’d be interested to hear answers to.

For now, it seems we’ll have to wait and see what — if anything — emerges in the early part of 2019.

Morgan Stanley’s price target for Apple stands at $211, which is 27 percent higher than Friday’s closing price of $166.52.