According to a top Wall Street tech analyst, the Cupertino based company Apple’s stock is no longer a compelling investment. The problem according to him is with the company’s move from a hardcore device based business to services based business model.

Over the years, Apple CEO Tim Cook has emphasised on the importance Apple pays to services along with its traditional “hardware & software” fusion. At its recent event, Tim Cook talked about the three – hardware, software, and services – to be an integral part of Apple.
However, Andy Hargreaves of Keybanc Capital Markets believes that this transition to a services based business model is a risky move. He adds that the company’s success in the services business depends on how much profit it can make from each user. “We believe Apple’s Services narrative is largely priced in, as AAPL’s valuation no longer appears attractive relative to other large services businesses,” Hargreaves wrote.
Services: A rapidly growing business

“If we are to call Apple a services company, we should evaluate it on typical services metrics of user growth and revenue and profit per user,” Hargreaves added. “Apple’s user growth is decelerating due to market saturation and its gross profit per user has been declining … These are not particularly attractive metrics for a services business, in our view.”
With slowing sales of smartphones, the arena which Apple conquered once and still does to some extent; the company quickly realized that the only way to stay in the loop would be to enter the services business as well. With a growing number of subscription based services, it was logical for Apple to do so. The company tends to make plans that lock users in its ecosystem by offering Apple-only exclusive services.
“Apple’s hardware sales are essential to virtually all Apple services, which suggests the two are part of a cohesive whole,” Hargreaves added. “Apple’s breakdown of Hardware and Services revenue and gross profit is increasingly irrelevant, in our view, as changes to segment reporting have prompted Apple to book several aspects of what most would think of as a hardware sale in the Services segment.”
Is Hargreaves right or he’s unable to see the light at the other end of the tunnel? Drop those opinions of yours down below.