Macquarie: Ignored Line In Apple's Quarterly Reports Is Key To Growth

Apple AAPL investors may be misunderstanding or ignoring the importance of the line item iTunes/Software/Services in its quarterly reports, one analyst said Thursday.

The line item includes revenue from the iTunes Store, the App Store, the Mac App Store and the iBooks Store. It grew 12 percent in the recent fiscal third quarter to just $4.48 billion of the company's $37.43 billion in second-quarter revenue.

"[It's] generally been ignored by investors but we estimate it contributes 20 percent to earnings before interest and taxes," Macquarie analyst Benjamin Schachter said in a note Thursday.

In recent quarters, Apple has offered an increasing amount of information on what comprises the line.

Schachter said information gleaned from Apple's most recent 10-Q shows that app store sales grew up to 40 percent. Schachter figures that apps will be Apple's fastest-growing and highest margin business "for many years to come."

iTunes content, in contrast, fell six percent and "music sales are likely a significant headwind," Schacter said.

Software services and sales grew 19 percent "and this should rise meaningfully" with additional sales driven by new iterations of the iPhone.

In recent quarters, Apple has provided an increasing amount of information on what goes into the line item and Schachter said investors ignore this at their peril.

The analyst maintained a Buy rating on Apple and a $102 target.

Apple traded recently at $95.21, up 0.76 percent.