Apple (NASDAQ:AAPL) saw its shares spring to life first thing Monday. The iPhone maker, after Goldman Sachs initiated coverage with a buy rating, saying Apple could get a big boost from its services business. The Wall Street bank’s 12-month price target of $199 implies Apple could rally more than 30% from here.
In addition, analyst Michael Ng put a per-share price target of $199 on Apple, implying some 30% upside from current levels, noting that the company's installed base of 1.8B active devices, along with its brand loyalty, has produced visibility into revenue growth.
The installed base growth, secular growth in services, and new product innovation should more than offset cyclical headwinds to product revenue (e.g., longer replacement cycles, slowing industry growth for PCs & tablets)," Ng wrote wrote in an investor note, adding the stock's valuation is "attractive" on both an absolute and relative basis.
In addition, Ng noted the majority of Apple's gross profit growth over the next five years should be from its Services segment, rising to 40% by fiscal 2027, up from 33% in fiscal 2022, thus supporting the stock's "premium multiple."
Moreover, Bank of America said on Monday that Apple is still seeing "muted" growth in the App Store more than 60 days into its fiscal second-quarter.
Citing third party data from Sensor Tower, analyst Wamsi Mohan noted that revenue grew just 0.5% year-over-year as of March 1, including 1.5% year-over-year growth in China. Total downloads have not fared much better, with downloads for the iPhone and iPad up just 0.8% year-over-year.
AAPL shares spiked $3.86, or 2.6%, to $154.89.
