Apple's Strong Services Revenue Boosts Wall Street's Confidence


Thanks to a strong showing out of Apple’s services business during the June ending quarter, Wall Street is getting more bullish on Apple.

According to a report in CNBC, the growth in Apple’s services business, which includes its App Store, Apple Music and iCloud, is boosting analysts’ — such as Bank of America’s Wamsi Mohan — views of Apple going forward. Bank of America reiterated its buy rating on Apple, pointing to growth in services. In June, Apple said sales increased 31 percent — higher than the 26 percent year-over-year growth Wall Street was looking for.

“This was the best quarter ever for services, with Apple reporting strength from the App Store, Apple Music, Apple Care and Apple Pay,” Mohan said in a research note. “Management remains confident in doubling its F2016 services revenue by F2020.” Mohan reiterated his $230 target price for Apple’s stock, which marks a 21 percent increase from where the stock closed Tuesday.

Meanwhile, Morgan Stanley said services growth at Apple could make up for any weakness the iPhone market sees for its devices. “We see more upside than downside risk to the upcoming iPhone product cycle and a building services narrative. Even if device revenue growth slows, services and wearables can pick up the slack,” analyst Katy Huberty said in a note to clients. She reiterated her overweight rating and $232 price target.

Michael Olson, the Apple analyst for Piper Jaffray cited paid subscription services as the reason for the earnings beat in its June quarter. Apple’s “services revenue growth rate … [drove] upside in the June quarter,” wrote the analyst reported in CNBC. “It was a beat and was largely driven by paid subscription (which is a significant and growing part of services revenue) growth, including Apple Music, iCloud, etc.”



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