By Senad Karaahmetovic
A Bernstein analyst remains cautious on Apple (NASDAQ:AAPL) stock given the elevated valuation.
The analyst reiterated a Market Perform rating on AAPL shares and a $170 per share price target.
“We see some opportunity for Apple to continue to outperform through its iPhone launch in September, per its historical pattern, but we believe risk/reward over the next 6 months - 2 years is neutral to modestly negative. AAPL trades at 26-27x earnings, well above historical levels on a relative basis (1.48x vs. 1.09x), and notably above other FAAMG names with higher growth,” he said in a client note.
Still, the analyst is not overly worried about Services growth deceleration. This business segment of Apple has decelerated for 4 consecutive quarters.
“Compares have been extraordinarily difficult, Apple TV+ accounting changes have impacted revenue growth, and Apple has still been growing services at 15% at constant currency,” the analyst added.
Even more positively, he sees Services continuing to grow at “a teens rate for the next 2-3+ years.”
“We believe that App Store can grow at double digits, Advertising at 20%+, the rest of the portfolio 8 - 10%, (driven by installed base growth and deeper penetration) and new service offerings. We forecast FY 23 services to grow at 14% vs. consensus at 12%,” he concluded.
Apple shares closed at $172.12 on Friday and remain only 3% down YTD.