Apple's True Secret Weapon? Differentiated 'Ethos,' Brean Capital's Ananda Baruah Says

In a report published Monday, Brean Capital analyst Ananda Baruah initiated coverage of Apple Inc. AAPL with a Buy rating and $160 price target.

According to Baruah, Apple is in a position to generate 15 to 20 percent earnings per share upside to Street estimates through 2017 for various reasons, one of which was attributed to "Ethos," its secret weapon that "truly distinguishes the company."

Ethos is a Greek word meaning "character" that is used to define the beliefs or ideals that characterize a community, nation, ideology, or in Baruah's case: a high-tech company.

"So whereas "traditional" organizations are structured with divisions that have their own P&Ls with their own GMs that work independently of other divisions, Apple has a single Executive leader team by function that works across all product areas," Baruah wrote. "This team meets each week to discuss, debate, review and plan. We believe this is a powerful cultural mechanism that allows for Apple not only to break through leverage across their product portfolio, but a dynamic that also allows them to innovate across functional areas in a way that simply isn't available to other organizations."

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Baruah further added that Apple is likely the only company that exists with best-of-class software, hardware and services skills. The analyst said this allows Apple to optimize its ecosystems across the entire "experience stack," delivering a "superior" user experience and "outsized" economic returns.

Finally, the analyst speculated that Apple's ultimate long-term vision is to extend its operating system in to every aspect of a consumer's life – as evident by the introduction of the Apple Watch, coupled with the announcements of CarPlay, HealthKit and HomeKit.