GOLDMAN: This Is The Most Important Thing In Apple's Earnings

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Photo: Photo by Kevork Djansezian/Getty Images

Bill Shope Goldman Sachs is raising its price target on Apple to $850 from $750 this morning.Of all the great news that came out of Apple’s earnings, this was the one thing he thought was more important than anything else:

Out of all the good news in the quarter, we believe Apple’s margin upside has the most important long-term implications for the story. While these margins should come down in quarters where iPhone mix is less substantial, the results suggest that annual margins can sustainably be much higher than investors previously appreciated. This substantially increases long-term earnings and cash flow generation potential. For CY2012, we forecast revenues of $168.29 billion and EPS of $49.70 (FY2012 of $156.49 bn/$45.72), versus $166.92 billion/$45.76 previously. Our CY2013 revenue and EPS estimates now stand at $203.07 billion and $60.16 (FY2013 of $193.15 bn/$57.19), versus $200.0 billion/$56.57 previously.

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