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Apple stock could hit $150 in a year, for a return of 40%, including dividends. Two Wall Street reports agreed on that point this past week, for different reasons. One argues that a rising portion of profit is coming from services, adding to how big Apple can become. The other says Apple enjoys the long and lucrative customer relationships typical of cable companies, and so shouldn’t be priced like a mere gadget hustler.

Before examining those points, consider the starting price. At a recent $108 and change, down 14% in a year, Apple (ticker: AAPL) trades at 11.5 times trailing earnings. That compares with 17.6 times for the Standard & Poor’s 500 index, but the discount is larger than those numbers suggest, and not just because Apple sits on cash and investments worth $38 a share.

Apple tallies its earnings under generally accepted accounting principles, or GAAP, as all companies must. But unlike many, it doesn’t then direct investor attention to a cleaned-up measure of earnings that excludes restructuring costs, option awards to employees, legal settlements, and so on. Using GAAP numbers, the S&P 500 trades above 23 times trailing earnings. Write-offs have been unusually large of late because of a deep downturn in the energy sector, but even assuming a more typical pace of write-offs, the market would trade at about 20 times trailing GAAP earnings.

Apple’s pessimistic price is owed to its slowing growth, largely traceable to the iPhone, which in the company’s latest fiscal year, ended in September, brought in two-thirds of revenue. That was a bumper year, when the iPhone 6 met pent-up demand for larger screens. Unit sales jumped 37%. The latest models—the 6s and the smaller SE—are mostly incremental upgrades. Unit sales are expected to decline 6.4%. Some of that could be offset by growth in services and the Apple Watch, which is no blockbuster but is adding revenue from a low base. Total company revenue is projected to decline 2.4% this fiscal year to $228.1 billion, pulling profit down 6.3% to $50 billion. With help from share repurchases, earnings per share are expected to fall 1.8%, to $9.06.

Note that Apple has topped earnings estimates each quarter for three years, so there’s a chance EPS could come out even or positive for the year. Not all of the slowdown is demand-related; last quarter, revenue grew 2% year over year, but absent the effect of a rise in the dollar, which made overseas sales less valuable, revenue would have grown 8%. The current lull could give way to better sales once some of those iPhone 6 buyers are ready to trade up. Early forecasts for the next two fiscal years have Apple returning to high single-digit growth in EPS. Meanwhile, earnings for the S&P 500 appear likely to fall for a fourth straight quarter for the first time since the global financial crisis.

In other words, if Apple is having a lousy year for growth, it’s not alone. But it’s selling for barely half the market’s price.

Apple’s new iPhone SE, for those who want a more compact phone. Photo: Apple

INVESTORS DON’T SEEM to fully appreciate Apple’s ability to scale up profits from services in coming years, according to Credit Suisse analyst Kulbinder Garcha, who added the stock to his firm’s Focus List last week. Apple sells apps, music, movies, warranties, online storage, and more. Many companies do, but Apple has an ecosystem advantage. A customer who pays, say, $10 a month for a terabyte of online storage is paying top dollar for a commodity product. But with Apple, they can view photos and videos across their devices without clogging up their hard drives, and new iPhone photos are added automatically. Is it worth it? Perhaps only for those who value ease over savings, but iPhone users have household incomes 45% higher than those using Android-based devices, and they spend seven times as much on mobile commerce.

Garcha estimates that Apple services already bring in 15% of gross profit and could reach 29% by 2020. Add installment plans for iPhones, and 55% of gross profit by then could come in the form of steady, annuity-like payments. He reckons Apple has long-term potential to reach 1.4 billion active devices with stable free cash flow of $67 billion a year, up from a billion devices now and $56 billion in free cash projected for this year.

Maybe it’s time to start measuring Apple against companies with similar financial attributes, rather than smartphone sellers. Based on a survey, Needham analyst Laura Martin, who initiated coverage with a Strong Buy rating on Tuesday, calculates a yearly customer churn rate of 12% for the iPhone ecosystem, or an eight-year average stay, on par with cable companies. Applying a cablelike valuation to Apple would put shares at about $180. Martin expects the stock to move toward that level over time, beginning with a rise to $150 over the next year.

Assuming Apple doesn’t beat earnings estimates over the coming year, a rise to $150 will put its shares at about 16 times trailing earnings. That’s GAAP earnings, remember, warts and all. In other words, Apple would begin to trade closer to AT&T (T), which goes for 16.5 times, than to HP (HPQ), the computer and printer spinoff of the former Hewlett-Packard, which goes for 10.7 times.

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