Apple‘s (NASDAQ: AAPL) stock price shot higher Thursday, after JPMorgan’s (NYSE:JPM) Samik Chatterjee initiated coverage of the tech giant with an ‘Overweight’ rating and a base-case price target of $272, which implies more than 21% upside from current levels/$224 per share.
Chatterjee said his call is based on growth in Apple’s compelling transformation to a services business, more pricing leverage in its core iPhone business”, innovation that allows the company to continue to disrupt new markets, as well as earnings growth from stock buybacks which can drive “considerable upside” to current share levels.
“While Apple’s leadership position in the premium smartphone market is well understood by investors, we still see considerable upside to the stock from current levels,” the analyst wrote in a note to clients.
Chatterjee also said he believes Apple’s “robust” high-single-digit growth in the installed base, which is considered a key contributor to services revenue growth, has not been fully appreciated by investors. The analyst sees the mix of services revenues increasing to 20% by the end of FY 2021. Apple’s services revenue accounted for just 8 percent of total revenue as recently as 2012.
Apple stock traded higher by nearly five points Thursday morning to $224.57. The name’s climb is part of a solid run. Shares of Apple have gained more than 32% since the start of the year, which strongly outperforms the S&P 500’s roughly 8% jump. Over the last 52-weeks, Apple has seen its stock price surge 43%. More impressively, shares of the iPhone maker currently trade at only 16.5x forward 12-month EPS estimates. Trailing-12 prints 20.4x.