We’re encouraged by building App Store momentum, both as evidence of Apple’s ability to increasingly monetize its nearly 1bn iPhone user base and in support of multiple expansion for the stock as the mix shifts to higher-quality, more recurring revenue. We balance our enthusiasm, however, with a more cautious view on iPhone (~50% of revenue) ahead as we continue to expect pressure on large discretionary consumer purchases against a weak macro backdrop, even with an upcoming 5G launch (in C4Q, per CSe).
With the stock essentially back to all-time highs (+10% ytd vs. S&P -4%) and now trading at a peak multiple (21x CY21 Street EPS vs. trailing 5-yr 14x) despite lingering headwinds to Product demand, we remain Neutral and await a better entry point.
Maintains Neutral rating, raises price target to $295 from $260.
My take: $260 was betty entry point.