Apple Inc. is inching ever closer to a $1 trillion market capitalization after its latest earnings beat.
Shares of the smartphone giant hit a new intraday high in Wednesday morning’s trading and are up 5.3%, to $200.31, in the session. Using Apple’s most recently disclosed share count of 4.84 billion from the earnings report, Apple’s stock would need to trade at $206.49 for the company to achieve a $1 trillion valuation. However, Apple is likely to give a more up-to-date share count in its next 10Q, expected out later today, which could show a reduction in the number of shares from the previous 10Q’s 4.92 billion.
“We believe Apple’s strong software capabilities, expanding services business and unique digital ecosystem at large will increasingly be appreciated by investors, driving Apple toward the $1 trillion market cap milestone,” wrote Monness, Crespi, Hardt & Co. analyst Brian White, who raised his price target to $275 from $235.
On a percentage basis, Wednesday’s movement would amount to Apple’s best single-day performance since February 2017 if the gains hold through the close. On a dollar basis, though, the stock is on track for its biggest move of all time.
Analysts in general grew more upbeat about several aspects of Apple’s AAPL, +5.02% business following the latest release, and at least 17 hiked their price targets, according to a FactSet count.
Perhaps the most important data point from Apple’s release was the average selling price of an iPhone, which amounted to $724 in the latest quarter. Bernstein analyst Toni Sacconaghi commented that the 20% boost to ASP relative to a year earlier “appear[s] to have surprised even Apple executives,” and he mused about what this performance could mean for the coming iPhone cycle.
“We can’t help wondering if Apple may feel incrementally confident about running the same ‘price playbook’ for FY19, though Q4 ASP commentary does not necessarily reaffirm this,” he wrote. He now projects a 5% increase in ASPs for the fiscal 2019 iPhone cycle, ahead of the consensus view, but said that “ASPs could plausibly increase by more.”
Sacconaghi calculates that every 2% bump in the average selling price amounts to a 1% revenue gain and adds 12 cents to earnings per share. He raised his price target to $200 from $190 but kept his market perform rating intact.”
Don’t miss: Here’s what could happen to Apple’s average selling prices in the next iPhone cycle
Needham analyst Laura Martin left Apple’s earnings call with a new appreciation for the company’s ecosystem. On the call, she asked Chief Executive Tim Cook whether new products like Apple Watches and AirPods were helping to bring new users into the Apple ecosystem, or if they were mainly there to serve people who already had iPhones. Cook replied that both are true and that Apple has seen some users “attracted to [the] iPhone because of the Apple Watch.”
Martin raised her price target to $220 from $210 on Wednesday, partly as a result of these comments.
“We believe that new products accelerate new member growth and create stickiness and higher average revenue per member,” she wrote. “By implication, Apple’s valuation should move away from hardware sales and toward annuity revenue streams.”
Apple’s path toward more recurring revenue hinges on its services business, which includes Apple Music, the App Store, and iCloud. Revenue from the segment grew 31% in the latest quarter and was a high point for analysts.
“The App Store, AppleCare, Apple Music, iCloud and Apple Pay all set new June quarterly revenue records,” Morgan Stanley analyst Katy Huberty wrote. “For the App Store, results were even more impressive when considering the Chinese government reportedly slowed the process of new app approvals in the quarter (China is the biggest App Store country in the world), although approvals appear to be accelerating in recent weeks.”
She rates the stock at overweight with a $232 price target.
Canaccord Genuity analyst T. Michael Walkley also cheered the services trajectory, and he projects that Apple will continue to grow services revenue faster than the overall business.
“We believe Apple can sustain double digit services revenue growth including ongoing 25% to 30% revenue growth from the App Store, strong subscriber growth in Apple Music, Apple Care, iTunes/iCloud and Apple Pay,” he wrote. Walkley raised his price target on the stock to $220 from $208.
Oppenheimer’s Andrew Uerkwitz highlighted Cook’s exchange with an analyst who asked about connected-home products as one of the “best questions” of the earnings call. Apple is widely thought to be behind Amazon.com Inc. AMZN, +0.12% and Alphabet Inc.’s GOOGL, +0.08% Google when it comes to smart speakers, but Uerkwitz “sense[d] Tim Cook’s comfort” with the company’s positioning in the home given that many people use their smartphones for voice commands around the house.
Read also: How we are using voice assistants, in one chart
Also of interest to Uerkwitz was Cook’s commentary on wearables, which Apple categorizes as the Watch, AirPods, and Beats. The category saw 60% growth in the latest quarter, and Cook disclosed that overall sales of wearables totaled more than $10 billion over the past four quarters.
“Apple Watch’s momentum validates its market leading position, unchallenged since release,” he wrote. “AirPod is emulating Apple Watch’s category-defining success and market dominance.”
Uerkwitz has a perform rating on the stock, which is based on his belief that the company will struggle to maintain medium- and long-term dominance.
Of the 41 analysts tracked by FactSet who cover Apple, 25 have buy ratings and 16 have hold ratings. The average price target is $209.47, 5% above current levels. The stock is up 33% over the past 12 months, while the Dow Jones Industrial Average DJIA, -0.11% of which Apple is a component, has gained 16%.
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