Shares of Apple (AAPL +0.11%) rose to record highs on Wednesday, a few days after the company revealed that over a half-trillion dollars transacted over its App Store ecosystem in 2019. The staggering figure demonstrated how powerful the company's platform has become and it highlighted the huge market opportunity the tech giant has to further monetize its installed base of more than 1.5 billion active devices.
Some fresh new positive analyst commentary is likely helping the tech stock, too. One analyst just upped his 12-month price target for the stock from $310 to $400. Another gave the stock a $390 12-month price target, up from $345 previously.
Here's a look at the stock's wild momentum -- and why analysts are so bullish.
Image source: Getty Images.
The tech giant's stock is soaring
Apple stock has been on a tear recently, rising 84% over the past 12 months. This includes a ferocious rebound from a sell-off in February and March. The stock is up about 60% from March lows.
Bullishness for the stock recently reflects the reopening of the company's factory in China after a brief pause earlier this year amid COVID-19 concerns and reports that the company may have returned to growth in its Greater China segment. Further, investors seem to have a growing appreciation for Apple's services segment, which is growing rapidly and is becoming a large part of the company's overall business. On April 30, Apple reported record services revenue of $13.3 billion -- up 17% year over year. The important segment accounted for 23% of total revenue and an impressive 39% of gross profit.
As Apple becomes less dependent on hardware revenue and sources an increasingly larger portion of its sales from its higher-margin and more dependable services segment, investors are more willing to pay a higher valuation for the stock.
The path to $400
On Monday, Citi analyst Jim Suva upped his 12-month price target for the stock by about 29% to $400 and reiterated a buy rating for the stock. The analyst listed five catalysts for the stock:
- The likely debut of new 5G iPhones this fall
- Lowered near-term market expectations for Apple's financial results because of COVID-19
- Potential for market share gains
- Rapid growth in Apple's wearables segment
- An acceleration in Apple's services business
Apple Watch Series 5. Image source: Apple.
RBC Capital Markets analyst Robert Muller boosted his price target for the stock for an entirely different reason: the company's aggressive share repurchase program, which has enabled the tech giant to repurchase more than $70 billion worth of stock in the reported trailing-12-mont period. Muller gave Apple stock a price target of $390, up from $345 previously.
Both of these analyst price targets represent meaningful upside for the stock from its current level of about $355.
Analysts, of course, could always be wrong. It's particularly difficult to predict where shares of a stock can be in a 12-month timeframe. But shares do seem attractive at this level in relation to the current valuation and the company's long-term growth prospects. However, that doesn't mean the stock couldn't trade lower for one reason or another in the coming months. Investors may want to hope for shares to pull back 5% to 10% to get a better entry point into the stock and to reduce some of the risk of underperformance over the next five years.
