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Apple Inc AAPL shares are trading higher Monday following positive analyst coverage from Goldman Sachs.
What Happened: Goldman Sachs analyst Michael Ng initiated coverage on Apple with a Buy rating and announced a price target of $199, citing significant upside in the tech giant’s services business.
“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,” the Goldman analyst wrote in a new note to clients.
Ng expects installed base growth, secular growth in services and new product innovation to more than offset cyclical headwinds over the next 12 months.
The Goldman Sachs analyst sees a majority of gross profit growth being driven by Services over the next five years. The durability of Apple’s installed base is what underpins the recurring revenue opportunity, which Ng refers to as the “Apple-as-a-Service” opportunity.
The analyst noted that Apple’s valuation is attractive relative to select large cap tech and consumer peers, as well as to its historical multiple. Apple is currently trading with a price-to-earnings multiple of approximately 25, according to Benzinga Pro.
See Also: Apple In Final Stages Of Production Testing New iMacs, Says Gurman: What Investors Should Know
AAPL Price Action: Apple has a 52-week high of $179.61 and a 52-week low of $124.17.
The stock was up 1.83% at $153.84 at time of publication, according to Benzinga Pro.
Photo: courtesy of Apple.
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Image and article originally from www.benzinga.com. Read the original article here.