Shares of Apple Inc.
are up 1.7% in premarket trading Monday after Jefferies anayst Timothy O’Shea began coverage of the stock with a buy rating and $265 target price. “We believe Apple’s stable iPhone business will serve as the foundation upon which it can build a massive, recurring and high margin Services business,” he wrote. O’Shea projects that Apple’s services business can make up a quarter of revenue and 40% of gross profit by fiscal 2022. “Applying a higher multiple compared to the lower-margin hardware business, we see a significant opportunity for investors as services alone could be worth $111 to $177 per share by that time,” he said. O’Shea cautioned that China is the “clear risk to our call,” writing that a trade war could hurt sales. A current freeze on mobile game approvals in the country, meanwhile, could hurt the services business in the near-term “although this looks like a classic short-term issue.” Apple shares have gained 33% over the past 12 months, while the Dow Jones Industrial Average
has risen 5.4%.
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