I believe that as Apple is able to scale their service revenue segment, I believe they will be able to better scale their company. Currently, services account for 15% of total sales, but service revenue has increased 31% YoY and 8% QoQ. Contributing to this was the amount of paid Apple Music subscribers, which grew to 270mm, which is up 59% YoY. So, What’s the Deal with Services? I believe service revenue is a much bigger deal than people are making it out to be, and here is why: it is a highly profitable segment that is easy to scale, and it comes back and contributes directly to the top and bottom line. Apple has some revolutionary offerings when it comes to Apple Pay, Apple Watch, Apple Music, and Apple TV. Revenues from services and licensing are on track to double to nearly $48bn by 2020. Apple recently hired former Sony executives Jamie Erlicht and Zack Van Amburg to get their feet wet in original television programming.Apple Pay has been expanded to over 22 different markets. Apple Pay users doubled, while transactions more than tripled YoY. Apple recently launched Apple Pay Cash, and is planning to expand into Norway, Poland, and the Ukraine in the next several months.There has been a ton of buzz around AI recently with AR/VR, and Apple has started to focus on development of these technologies. According to an IDC report, global spending on AR/VR will witness a CAGR of 98.8% from 2017-2021.In their most recent quarter, Apple’s operating expenses increased 16% to $7.53bn while their operating margin declined to 26%. While this is due to expanding R&D costs for Apple Car, Apple TV, and other expenses, a focus on software and services will not cost as much to develop as hardware, which means more profitability. The most important thing about service revenue is how it’ll affect Apple’s stock price. Apple is currently trading at around 16.6 TTM earnings. If Apple trades just above this metric at 19x earnings, Apple is worth $199. If Apple trades at 25x earnings, Apple is worth $230 per share. That’s great on paper, but is it possible? Yes. The industry average for companies with service revenue is 33x earnings. That would put apple at $303/share.Source: user @itschrisolson $AAPL, Apple Inc. / H1