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Apple stock boosted by 14% App Store growth, says Evercore

EditorEmilio Ghigini
Published 10/03/2024, 06:44 PM
© Reuters.
AAPL
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On Thursday, Evercore ISI maintained a positive outlook on Apple Inc. (NASDAQ:AAPL) stock, reiterating an Outperform rating with a $250.00 price target. The firm's assessment is based on robust growth in App Store revenues, which increased by 14% in September, contributing to a quarterly growth rate of 13%. This performance is expected to bolster Apple's Services revenue growth, which is projected to rise by approximately 14%, aligning with the company's guidance for double-digit growth.

The App Store's recent success is partly attributed to stable growth in key markets like China and Japan, where new gaming titles have likely spurred consumer spending. In particular, the European Union's App Store saw a notable 31% year-over-year revenue increase in September, despite the recent implementation of the Digital Markets Act (DMA) driven changes.

The significance of the App Store and Google (NASDAQ:GOOGL) payments to Apple's Services business cannot be overstated, as they represent major components of this revenue stream. The analyst noted that as long as no unexpected slowdowns occur, the newer and faster-growing Services segments should sustain double-digit growth rates, with the potential to reach the mid-teens.

Despite the increasing difficulty of year-over-year comparisons as the calendar year progresses, which could lead to deceleration, such a trend has not yet been observed. The analyst concluded that the App Store had a strong quarter, with continued strength in the entertainment category and stability in gaming, suggesting that there could be potential for earnings to surpass current estimates for the September quarter. The firm stands by its Outperform rating and $250 price target for Apple stock.

In other recent news, Apple Inc. has seen a flurry of activity from financial analysts. BofA Securities maintained its Buy rating on Apple, citing steady iPhone 16 shipping times and potential improvements to gross margins.

The firm also noted that the initial demand for the new iPhone models may have been impacted by the absence of Apple Intelligence features at launch, but anticipates a surge in demand once these AI features become available. On the other hand, JPMorgan has reiterated its Overweight rating on Apple's stock, despite a slight moderation in near-term iPhone unit forecasts, and anticipates a robust product cycle for the iPhone 16 Series.

In terms of recent developments, Apple is preparing for the production of a refreshed iPhone SE and new iPad Air models. However, the company has yet to release official statements regarding the specifications, pricing, or exact release dates for these devices. In legal news, the National Labor Relations Board (NLRB) has filed a complaint against Apple, accusing the company of implementing illegal workplace rules that interfere with employees' rights to organize and advocate for improved working conditions.

Lastly, Apple's supply chain might face disruptions due to a recent fire at a Tata Group facility in Tamil Nadu, which has halted the production of iPhone components. This incident could potentially affect the production of older iPhone models in India. However, no official statement has been released by the company regarding this matter.

InvestingPro Insights

Apple's strong performance in the App Store aligns with several key metrics and insights from InvestingPro. The company's revenue for the last twelve months as of Q3 2024 stood at $385.6 billion, with a quarterly revenue growth of 4.87% in Q3 2024. This growth is reflected in the App Store's performance and supports Evercore ISI's positive outlook.

InvestingPro Tips highlight that Apple is a "Prominent player in the Technology Hardware, Storage & Peripherals industry" and has been "Profitable over the last twelve months." These factors contribute to the company's ability to maintain strong App Store revenues and overall Services growth.

Additionally, Apple's stock has seen a "Large price uptick over the last six months," with a 34.01% total return in that period. This aligns with the positive sentiment expressed in the article and the potential for earnings to surpass estimates.

For investors seeking more comprehensive analysis, InvestingPro offers 16 additional tips for Apple, providing a deeper understanding of the company's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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