Analyst: Apple stock will outperform on growing services sales

Rich Smith for The Motley Fool:

Getting back to a trillion won’t be easy. It won’t happen in a day. Both revenue and units sold of Apple’s marquee product — the iPhone — remain “muted,” says Evercore. But as the analyst explains, “[W]e see several catalysts that should enable the stock to grind higher from current levels.” (How much higher? To be precise, Evercore is looking for a rise to $205 per share within a year, which would add 12% to Apple’s market cap, putting it at about $950 billion — which isn’t technically a trillion, but close enough for government work, as the saying goes.)
One of the catalysts that Evercore is counting on will be the iPhone itself. Evercore believes that Apple will “launch” a 5G-capable iPhone toward the end of its fiscal 2020, which should lift both unit sales and revenue. In the meantime, Evercore also sees “easing commodity costs and better leverage” helping to grow the gross margin on the iPhones the company does manage to sell this year.
Evercore notes that Apple is currently growing its services revenue at a double-digit clip “with potential acceleration given new revenue streams” (such as Apple News+, which racked up 200,000 subscribers in its first week).
Rounding out Evercore’s list of potential catalysts to drive the stock higher is the analyst’s belief that Apple’s ongoing share buyback program “enables 2-4% share reduction.”
MacDailyNews Take: As undervalued as Apple is, you’d think some common sense would leak into the market sometime and at least begin to fairly value Apple.
As Smith writes, “Seems to me a company raking 87% of the smartphone industry’s profits should probably fetch a bit of a premium to fair value, though — and certainly not a discount. Simple math, therefore, tells me that Evercore is right, and Apple stock should ‘grind higher’ from here.”
[Thanks to MacDailyNews Readers “Fred Mertz” and “Brawndo Drinker” for the heads up.]