FORTUNE — “We think it’s time to revisit what makes Apple unique,” writes Lazard Capital Market’s Edward Parker in a note to clients that initiates coverage with a Buy rating and a $540 price target.
Don’t think of Apple (AAPL) only as the purveyor of jewel-like devices, he suggests. Or elegant, easy-to-use software. Or an “ecosystem” that keeps its customers coming back for more.
All of those factors are important, Parker writes, but none of them adequately explain how Apple manages to capture a disproportionate share of the profits in every business it’s in. (In the global market for smartphones, for example, it takes home more that 70% of the profit with less than 20% market share.)
What Wall Street needs, Parker suggests, is a fresh perspective — a new way of looking at the company.
And this is it: Think of Apple’s core business as selling end users flash memory at steep markups.
“We propose,” he writes, “that Apple is a ‘storage’ company, not only levered to data creation but instrumental in driving data creation in ways its competitors are not. Apple sells storage by delicately but deliberately incenting customers to purchase NAND flash memory at 80%-90% incremental margins. We believe this model is unique in the industry and will ensure Apple avoids the pitfalls of former handset innovators that are rapidly falling into the annals of history.”
As Parker shows in the chart above, this makes Apple’s business model very different from Google’s (GOOG) or Samsung’s. Google’s mission is to drive traffic to its search engine and to data stored in its own cloud servers, not on users’ devices. Samsung makes and sells its own memory chips, but is also perfectly happy to let customers walk out the door and buy additional memory from its competitors.
Only Apple gives its uniquely loyal customers ever stronger reasons to buy higher-capacity phones, tablets, music players and computers at margins far higher than the market for raw memory can bear.
“Challenges remain and the company needs to keep the magic alive,” Parker writes in conclusion. “That said, we think the worst is behind Apple and believe it’s time to long the stock. Our 12-month price target of $540 is based on 12x our calendar 2014 EPS estimate of $45, representing a potential return of 25% from current levels.”
UPDATE: Asymco‘s Horace Dediu is unimpressed wtih Parker’s framework.
“The NAND flash markup meme is being repurposed from the iPod era,” he writes. “I heard it back then as the reason why the iPod was so profitable and that once that ability to mark up flash would disappear then the company would be finished.
“It was not insightful then and it’s not insightful now.“Apple is not a storage company. It is successful (and fails) on the basis of being able to innovate in ways that others can’t. That means it approaches all open problems with an integrated solution. As long as that approach is in step with the evolution of the market and technology, they are successful. When it’s not in step then it is not successful.Being able to charge a premium for storage is a result of having this model not a cause for it.”