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Today, after the market close, Shannon Cross from Credit Suisse assumed coverage on Apple Inc. (NASDAQ: AAPL) and upgraded the company to outperform from the prior analyst rating of neutral with a $201 price target, which implies a 17% upside potential to current levels.
According to the analyst, the company’s installed base of over 1.8 billion devices accelerates market adoption of its services and software offerings and creates stickier customer relationships with higher wallet share, which fortifies the company's ecosystem.
The company’s services revenue grew at a 23% CAGR between fiscal 2015 and 2021, with a blended gross margin of more than 65% despite several newer offerings that are still scaling (e.g., TV+). The analyst expects Services as a percentage of revenue and profit to continue to expand supported by new offerings (Payments, Advertising), and estimates gross margin to continue to trend around 43%, with inflation and currency headwinds offset by higher Services revenue (growing double digits) and vertical integration of components.
Furthermore, the analyst believes the company’s $192 billion cash on hand provides it with ample dry powder for organic investments, shareholder return, and continued M&A.
By Davit Kirakosyan
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