By Senad Karaahmetovic
Goldman Sachs initiated research coverage on Apple (NASDAQ:AAPL) with a Buy rating and a $199 per share price target.
The analysts highlight the installed base success, which supports Apple-as-a-Service opportunity for the Cupertino-based titan.
“Apple’s success in premier hardware design and resulting brand loyalty has led to a growing installed base of users that provide visibility into revenue growth by reducing customer churn, lowering customer acquisition costs for new product and services launches, and encouraging repeat purchases,” they said in a client note.
Tailwinds, such as ”installed base growth, secular growth in services, and new product innovation should more than offset cyclical headwinds to product revenue,” they added.
The analysts also note an “attractive” valuation, relative to AAPL’s historical multiple and large-cap tech stocks.
“The majority of gross profit growth over the next 5 years should be driven by Services, which should increase AAPL’s gross profit from Services to 40% by F27 (v. 33% in F22), supporting AAPL’s premium multiple,” they wrote in a note.
Despite near-term headwinds, Goldman analysts expect the active iPhone installed base to continue growing. This is because first buyers and those switching from Android to iPhone should “more than offset churn.”
Ultimately, they expect to see the active installed iPhone base rise from about 1.1 billion at the end of 2022 to roughly 1.3B by 2026.