A Wall Street analyst revised the technology giant’s price target today.
What took place? As of 11 a.m. ET today, Apple shares (AAPL 2.76%) were up 2.6%. Erik Woodring, an analyst at Morgan Stanley (MS 1.53%), raised his price target for the stock from $175 to $180, citing five catalysts for the stock:
Even though the success of new product launches, rising iPhone demand, and the iPhone subscription service are all up for debate, there is no denying that Apple has a significant opportunity to increase services revenue and raise gross margin.
For instance, Apple was impacted by adverse foreign exchange movements even though reported services growth was just 6% in the most recent quarter. However, services revenue increased by 13% in constant currency, exceeding Woodring’s expectation of double-digit growth in services in 2023.
The opportunity to increase margins by increasing services revenue is obvious given that its services gross margin is nearly 71% and its products gross margin is 37%.
Apple’s services revenue is rising at an impressive rate, and the company sees an opportunity in expanding its international market share. The company will likely be able to at least maintain its dominant market position with the assistance of an iPhone subscription service.
However, the success of expanding product sales, particularly those of the iPhone, remains crucial to the investment case. All of Woodring’s other catalysts will come into play if that goes as planned, potentially resulting in a significant upside for the stock.