Wall Street analysts were smitten by a rebound in sales of Apple’s iPhones after a year of decline. So much, in fact, that they looked past a weaker-than-expected rise in services revenue, the company’s growth driver.
At least 15 brokerages raised their price targets on the company’s shares, with DA Davidson setting the most bullish price target of $385, well above the stock’s current median price target of $325. Shares of the company rose to over $323 in the latest session.
“We see Apple’s December 2019 quarter as a microcosm for its calendar 2020 performance, with the iPhone, once again, returning to the front and centre,” DA Davidson analyst Tom Forte said.
He attributed part of the iPhone bounce to Apple’s new credit initiatives, which enable consumers to purchase a phone and pay for it in monthly installments without paying interest.
Investors have fretted over the long-term growth prospects of the company’s phone business, which has been buffeted by increased competition from cheaper phones from rivals such as Samsung and Huawei.
Oppenheimer’s Rick Schafer argued the widely touted release of a 5G iPhone later this year would spur demand. Robust iPhone sales helped the company make up for weakness in its services revenue in the company’s fiscal first quarter of 2020 reported earlier in the week.
The services business, which includes the Apple TV+ streaming service, iCloud storage plans and fees from app developers, has consistently grown over the past two years, reaching $12.7bn (€11.5bn) in revenue in the quarter.
Cowen and Co analyst Krish Sankar noted that the services segment reached its $50bn run rate target ahead of schedule and argued that the company’s pivot to a content oriented recurring revenue model is a powerful long-term earnings driver.