The central bank is not normally in the business of easing into an economy that is showing few signs of a recession, generally holding fire until more pronounced signs of a...The Fedread more
His case for gold comes as central banks get more aggressive with policies that devalue currencies and are about to cause a "paradigm shift" in investing.Marketsread more
CSX said it expects revenue to fall as much as 2% in 2019, well below a previous forecast of an increase of 1% to 2%.Marketsread more
Challenging conditions in the U.S. housing market, along with tighter currency controls by the Chinese government, cause a stunning drop in foreign demand for American homes.Real Estateread more
The growth in net interest income, a main engine of the industry's profit, looks to slow to a halt in the back half of this year.Banksread more
Here's how Amazon sells ads, and why it has a natural edge over Google and Facebook in some areas.Technologyread more
Netflix reports earnings Wednesday as it loses licensed shows to rivals launching their own streaming services.Technologyread more
Federal Judge William Pauley wrote in a court filing made public Wednesday that materials related to Cohen's campaign-finance probe should be unsealed — and denied a request...Politicsread more
The "'Cadillac tax," set to go into effect in 2022, is unpopular with both Republicans and Democrats, who say it punishes the middle class.Health and Scienceread more
Facebook's head of Calibra David Marcus is grilled during a House Financial Services Committee hearing over the company's digital currency plans.Technologyread more
Gov. Phil Murphy of New Jersey announced a lawsuit against the IRS and Treasury Secretary Steven Mnuchin, responding to new, final rules from the IRS that would largely block...Personal Financeread more
While cutting iPhone estimates for Apple's fiscal 2019, Jefferies analysts say the company's services margins will greatly surpass expectations.
This is a story Apple has been trying to tell as it aims to shift the focus from its flagship hardware product. Since Apple announced during its fourth-quarter 2018 call with analysts that it would no longer break out iPhone unit sales, investors have feared that iPhone sales will continue to slow as the market reaches saturation. The company has tried to assure investors that other areas of its business — including services, which encompasses offerings such as Apple Music, iCloud storage and App Store downloads — would soon become key revenue contributors. Jefferies' assessment buys into that theory.
While cutting iPhone unit sale estimates by 3 percent for fiscal year 2019, Jefferies analysts predict the gross margin on Apple services will be 60 to 66 percent over 5 years, compared with the 56 percent consensus estimate.
"We believe Apple intends to tell a compelling Services story when it discloses gross margin for the first time ever next earnings," Jefferies wrote in the note published Wednesday. It estimates the App Store will have a 19 percent compound annual growth rate over 5 years to surpass $32 billion in fiscal year 2023, with an 80 percent growth margin. Apple Music is growing faster but with lower margins, the analysts wrote, and they expect 34 percent compound annual growth rate over 5 years with a gross margin of 19 percent.
"The setup resembles when AMZN first disclosed AWS margin back in '15, a positive for that stock," the analysts wrote, referring to Amazon's disclosure of its margins for its cloud division, Amazon Web Services.
Apple has already made clear it intends to push further into non-hardware revenue streams. The company has recently begun buying its own lineup of shows for what will reportedly be the company's Netflix competitor. CNBC reported in October that Apple is planning to give away some of its original shows through the "TV" app that's included with iPhones and iPads.
"The opportunity for investors is that these higher margin, higher growth software businesses deserve a higher multiple vs the lower margin, lower growth hardware business," according to the note, which rated Apple a buy while cutting its price target from $265 a share to $225 a share. Jefferies estimates earnings per share will almost double by fiscal year 2023 to reach $22.19 per share.