Apple(US:AAPL) SINOLINK SECURITIES·2025-03-18 05:09Investment Rating - The report initiates coverage with a "Buy" rating for the company [4] Core Views - The company is positioned as a leader in consumer electronics with significant advantages in integrated hardware and software, making it suitable for edge AI deployment [1][15] - The company has over 2.3 billion active devices globally, indicating a strong user base for edge AI applications [1][26] - Revenue growth has slowed post-FY22, but service revenue continues to show double-digit year-on-year growth [1][32] - AI is expected to drive software revenue growth and enhance free cash flow, supporting ongoing share buybacks and dividends [2][41] Summary by Sections 1. Comprehensive Hardware and Software Coverage - The company has a strong competitive edge in edge AI due to its integrated hardware and software ecosystem, including proprietary processors and operating systems [15][17] - The latest A and M series processors utilize advanced 3nm technology, ahead of competitors [17][20] 2. AI Expected to Drive Software Revenue - AI is anticipated to create additional software revenue streams, with subscription models expected to be introduced around 2027 [2][42] - The company has a high proportion of paid users, with nearly half of its user base subscribing to various services [2][50] - The introduction of Apple One subscription service is expected to enhance average revenue per user (ARPU) [2][56] 3. AI Empowering Hardware and Self-Developed Components - AI capabilities are expected to shorten product replacement cycles and expand the range of terminal products [3][41] - The company is increasing its self-developed chip ratio, which may mitigate potential tariff risks [3][21] 4. Profit Forecast and Investment Recommendations - Projected net profits for FY25 to FY27 are $98.53 billion, $116.97 billion, and $130.35 billion, respectively, with growth rates of 5.1%, 18.7%, and 11.4% [4][7] - The target price is set at $281.99 based on a 35X PE ratio for FY26 [4]