Apple stock gets second vote of confidence from analysts this week

For the second time this week, analysts are giving Apple’s (AAPL) stock a vote of confidence. On Monday Goldman Sachs’ Michael Ng initiated coverage of the iPhone maker with a Buy rating and price target of $199, and now Wedbush Analyst Dan Ives is raising his own price target on the stock from $180 to $190.

In a note to investors, Ives said that supply-chain checks out of Asia show demand is increasing demand for Apple’s iPhone. That’s especially true in China, which saw a decline in the prior quarter due to COVID-related lockdowns in the region. China made up about 18% of Apple’s sales in 2022.

“We are seeing no major unit cuts from suppliers in Asia around iPhone production yet, which is a good sign that shows a steady demand curve on the flagship iPhone 14 Pro in March/June and goes against the common negative investor sentiment on Apple (and broader tech) in this [Federal Reserve and Chairman Jerome] Powell driven narrative,” Ives wrote in his note.

Apple CEO Tim Cook gestures at the Apple Fifth Avenue store for the release of the Apple iPhone 14 range in Manhattan, New York City, U.S., September 16, 2022.  REUTERS/Andrew Kelly

Apple CEO Tim Cook gestures at the Apple Fifth Avenue store for the release of the Apple iPhone 14 range in Manhattan, New York City, U.S., September 16, 2022. REUTERS/Andrew Kelly

Ives also pointed to Apple’s services business as a potential catalyst for the company, saying that he expects the segment growth to reaccelerate into the double digits.

In his note, Ng also pointed to services as a means for Apple to further grow its business.

According to Ng, Apple’s services business should account for 40% of the company’s gross profit by 2027, up from 33% in 2022, thanks to iCloud+ sales, improved advertising revenue, and a boost in Apple TV+, Apple Arcade, and Apple Fitness+ subscriptions.

For his part, Ives said he believes Apple’s services business is worth roughly $1.2 trillion to $1.3 trillion for Apple’s sum-of-the parts valuation and is under-appreciated by Wall Street.

But services isn’t the only thing the analysts are banking on. Ng said he expects Apple to continue to grab market share from Android-powered competitors in both mature and growth markets. Ives, meanwhile, pointed to the iPhone 15, Apple’s upcoming AR/VR headset, and new Mac hardware as potential boons for the company’s share price in the coming months.

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Apple suffered a setback in Q1, as revenue declined 5% year-over-year due to the strong dollar and COVID lockdowns in China that hindered iPhone production.

In an effort to juice sales, Apple introduced a new yellow version of its iPhone 14 and iPhone 14 Plus on Tuesday. The iPhone 14 Plus is reportedly a weak point for Apple, with consumers choosing to either buy a standard iPhone 14 or make the jump to the company’s pricier Pro models.

The iPhone 14 Pro, which starts at $999, is just $100 more than the $899 iPhone 14 Plus, but sports a better processor and camera setup, making it a more attractive value for consumers.

As for Apple’s upcoming headset, there’s no guarantee the AR/VR gear will be a smash hit. According to The Verge, people who purchased one of Meta’s VR headsets in recent months are using it less often than those who bought them earlier in their life cycles.

That could mean that earlier adopters are simply more interested in the technology, while mainstream consumers aren’t particularly attached to it.

Apple will need its headset to be a truly impressive product if it’s going to drive massive consumer interest. We’ll find out more later this summer when the company is expected to reveal the product.

Got a tip? Email Daniel Howley at [email protected]. Follow him on Twitter at @DanielHowley.

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