Wall Street's 'love affair' with iPhone unit sales, and not Apple's ecosystem, seen as misguided

Timothy Arcuri of Cowen and Company believes that going forward, Apple will focus on offering users a "vastly superior software experience" on the iPhone platform, he said in a note to investors on Tuesday. He predicts that the company will eventually transition into secure mobile payments via iPhone, adding to its suite of valuable services such as iTunes and the App Store.

"The Street's love affair with units continues to miss the transition that is underway to a services-based monetization phase," Arcuri wrote.

Analyst Timothy Arcuri expects that going forward, Apple will focus on software and services, making its ecosystem potentially the company's greatest asset.Emphasizing his thesis was Apple's announcement from earlier Tuesday, in which the company revealed that total App Store sales exceeded $10 billion in 2013, with $1 billion spent by customers in the month of December alone. Developers keep a 70 percent share of applications they sell on the iOS App Store, while Apple takes a 30 percent cut for upkeep of the store and hosting of applications.

Arcuri noted that prior to 2013, Apple developers had earned $7 billion in cumulative revenue, meaning that last year alone effectively doubled the total payout to iOS developers.

"The (roughly 100 percent) year over year developer revenue growth seen in 2013 is well ahead of AAPL's overall growth rate and suggests the iOS ecosystem remains the dominant mobile platform for developers," he said.

He estimates that the iOS installed base has now downloaded as many as 70 billion applications cumulatively, representing year over year growth of up to 50 percent in calendar 2013.

Cowen and Company has retained its "outperform" rating for AAPL stock, and continues to hold a price target of $590.