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Apple stock is still undervalued and the new 'bundles' show why: analyst

A proposed ‘bundle’ of Apple (AAPL) products for one low price is the newest reason that even at a nearly $2 trillion market cap, the tech giant’s stock may still be undervalued.

“I think traditionally, Apple’s stock has always been undervalued,” veteran tech analyst Rene Richie told Yahoo Finance’s The First Trade. “We saw them reach their goal of doubling revenue from services early. And it seems that still has running room for them. And as we approach things like augmented reality glasses, all of these services, that’s a greater service for all the value they can tap into.”

If the latest speculation on Apple holds true, it could be well down the path of doubling its revenue from services again in the not too distant future.

Apple is planning to debut a host of subscription bundles when it reveals its new crop of iPhones in October, according to Bloomberg. There is likely to be several tiers, such as an entry-level one that offers Apple Music and Apple TV+. More expensive bundles may include Apple Arcade, Apple News+, extra cloud storage, Apple Music and Apple TV+.

Photo by: STRF/STAR MAX/IPx 2020 7/30/31 Apple announces a 4:1 stock split after a very successful quarter.
Photo by: STRF/STAR MAX/IPx 2020 7/30/31 Apple announces a 4:1 stock split after a very successful quarter.

Any service bundle would inject a fresh, recurring revenue stream into Apple. And it would come at the time of potentially the introduction of Apple’s first suite of 5G iPhones. Couple these two growth drivers together, and Wall Street may soon be tripping over themselves to mark up their earnings estimates on Apple for the next several years.

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The tech giant’s stock price theoretically would follow the rising tide of those sell-side profit upgrades.

“We believe this could be a significant move for Apple and potentially increase the services revenue trajectory by up to 5% in 2021. This is Cook & Co. further monetizing its installed base with the bundling strategy a genius move in our opinion,” Wedbush tech analyst and Apple bull Dan Ives tells Yahoo Finance.

Apple’s stock has climbed a cool 58% year-to-date. The Nasdaq Composite has gained 23%, while the Dow Jones Industrial Average — in which Apple is a member — has dropped 2%.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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