Apple stock jumped on Monday after getting its second bullish report from a Wall Street brokerage firm in as many trading days.
Goldman Sachs analyst Michael Ng initiated coverage of Apple stock with a buy rating. Also, he set a Street-high price target of 199.
On Friday, Morgan Stanley analyst Erik Woodring reiterated his overweight, or buy, rating on Apple, calling it a "top pick." He also raised his price target to 180 from 175.
On the stock market today, Apple stock rose 1.9% to close at 153.83.
Apple Services Driving Profit Growth
In a note to clients, Ng said he sees Apple using its massive installed base of users to drive sales growth and improved profitability.
"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," Ng said.
The majority of Apple's profit growth over the next five years will be driven by services, Ng said. Services, with their higher profit margins, should support a premium multiple for Apple stock, he said.
"The durability of Apple's installed base and the resulting revenue growth visibility from attaching more services and products is what underpins the recurring revenue — or Apple-as-a-Service — opportunity," Ng said.
Apple Stock Approaching Buy Point
Apple stock has been consolidating for the past 61 weeks, since it hit a record high 182.94 in January 2022.
More recently, Apple stock has formed a cup-with-handle base with a buy point of 157.48, based on IBD MarketSmith charts.
Apple has an IBD Composite Rating of 70 out of 99, according to IBD Stock Checkup. IBD's Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock's strengths. The best growth stocks have a Composite Rating of 90 or better.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
