On Monday, Apple unveiled its iCloud service, which will allow users to store digital files such as photos, music and videos in the cloud on remote servers, and access them through smartphones, PCs or tablets.
We believe that this is a good move for Apple (AAPL) as users will benefit from being able to listen to music from any device. Google (GOOG) and Amazon (AMZN) have tried to bring similar services in the past, and we believe Apple’s large iTunes user base, MobileMe platform and the popularity of the iPhone will help drive adoption of iCloud.
Although iTunes accounts for only about 2% of our $430 price estimate for Apple stock, we believe that, in addition to driving iTunes sales, this service will help strengthen Apple halo effect for its more lucrative products.
The iCloud service should reinforce the platform impact of Apple’s products and ultimately help sell more devices like Macs, iPads and iPhones. iPhones account for more than half of our valuation for Apple.
In a scenario where the iPhone gains market share at a faster rate than we expect and reaches 20% of all mobile phones sold by the end of the Trefis forecast period vs. 13% as we currently forecast, this implies an approximately 30% upside to our current forecast for Apple’s stock.
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