“We’re not expecting any kind of multiple expansion,” Hargreaves said. “I don’t think that’s realistic at this point for Apple, but just the growth that we’re going to see from those products driving down to the bottom line gets us there.”
Hargreaves added that a new iPad, which he expects to be announced in February and launched in March, should reinvigorate Apple’s tablet sales.
Although he said he is not concerned about CEO Tim Cook’s ability to steer the company, he does look closely at the company’s margins.
“This is a company that operates in consumer electronics, where people are used to razor-thin margins, and they have extraordinarily strong both gross and operating margins,” he said.
Apple competes against companies, such as Google and Amazon , that are willing to monetize their products in different ways, Hargreaves added.
“So the threat of long-term margin compression is something that I worry about,” he said. “At this point — and this has been our view for a long time — I think the strength of Apple’s brand but also their stack of services and software is enough to sustain the margins.”
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