Apple (AAPL) PT Bumped to $115 at Macquarie Following Better-than-Expected Qtr, Outlook

Macquarie analyst Ben Schachter affirmed his Outperform rating and bumped his price target on Apple (NASDAQ: AAPL) to $115.00 (from $112.00) following better than expected results and guidance, driven by iPhone and Services.

Schachter commented, "We continue to focus on Services, particularly Apps, as we think it is still underappreciated by investors. In fact, we believe that the Services line contributed approximately 28% of gross profits in the quarter. With App Store sales growth of 37% y/y (accelerating for the fourth consecutive quarter), the App Store is, and we suspect will remain, the fastest growing and highest margin AAPL business for the foreseeable future. Most notably, this is still largely driven by games. We expect that as app utility improves in other categories such as health care, fitness, enterprise, autos, home automation, education, etc…, AAPL will be a prime beneficiary. In other words, we, the company, and we expect investors, are becoming more aware of the fact tha! t Services and apps matter for the stock. To put a fine point on this, we expect that the gross revenue of the Services business will hit approximately $50b next year and account for 25% of gross profits."

Key positives in the quarter

1) iPhone units better than expected, driven by SE (dev. and emerging markets)

2) Seeing solid new user growth, high % of switchers

3) Guidance better than expected

4) Services grew 19% y/y, App Store up 37% y/y

5) Commented that AppleTV has bigger ambitions than reflected in the current product – expect increased speculation about subscription services

6) iPad rev growth positive for first time in nine quarters, driven by iPad Pro ASP

Key concerns in the quarter

1) Overall rev continued to decelerate

2) Operating income lowest since FY’13

3) No update on new iPhone

4) China decelerated significantly (though given inventory adjustments, not as bad)

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $96.67 yesterday.

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