Sanford Bernstein’s Toni Sacconaghi this afternoon weighed in with his latest think piece on Apple (AAPL), musing about the question of whether Apple stock should be treated like that of a cable company.
The shares’ earnings multiple continues to compress, at 10.4 times this fiscal year’s projected $44.18 per share in profit.
Investors worry that Apple’s business is so heavily predicated on sales of the iPhone — the source of almost 2/3 of profits — that the company is at risk of being pushed aside at some point if it ever turns out a Razr-like flop.
“However, we believe that rather than being a transactional company with volatile revenues, Apple is a platform company with stable, almost annuity-like revenue streams, driven by strong user lock-in,” writes Sacconaghi.
The apps and other content that go into Apple’s i-devices give it 90% or greater customer repurchase rates, he notes, with an implied “annual churn” for the iPhone customer base of less than 5%, which is “far better than the 15%+ reported for most cable/telco companies,” he observes.
The upshot, he says, is customer loyalty, as proven by anecdotal carrier remarks that iPhone subs stay customers of telco plans longer than most cell phone users.
Sacconaghi computes the “lifetime value” of an Apple iPhone customer at $700 to $900, $600 to $650 for the Mac, and $275 to $300 for the persona who buys an iPad.
The “net present value” of those customer valuations is $204 billion right now, likely going to�$293 billion in fiscal 2013 (ending September of that year) he estimates, and to $373 billion at the end of fiscal 2014, he projects.
And, for the whopper: “Our analysis points to a customer + cash value of $548B at the end of FY14 under conservative assumptions, a 28% premium to Apple’s current market capitalization.”
Sacconaghi reiterates an Outperform rating on Apple shares and a $600 price target.
Apple shares are up $3.86, or 0.8%, at $463.56, giving the company a market cap of $432.1 billion.
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