Based mostly on Services growth prospects, Bernstein analyst Mark Newman raised his Apple price target to $340 from $325, while maintaining an Outperform rating.
Analyst Mark Newman mentioned that there's now better insight into Apple's long-term earnings potential. Apple has seen growth in services and ongoing capital returns, as highlighted in a recent research summary.
Bernstein's revised target reflects confidence in Apple's ability to generate steady cash flow even as hardware demand remains uneven in some regions. The firm pointed to expanding services revenue, higher margins, and a large installed base as key supports for the higher valuation.
The analyst pointed out that Apple's share repurchase program is a key factor supporting per-share earnings growth. Additionally, Apple's ability to generate free cash flow over time plays a significant role in growth.
Why Bernstein thinks Apple can keep climbing
Newman is focusing more on stability than on blockbuster hardware growth. He highlights Apple's Services business, which consistently delivers higher margins and steadier cash flow than device sales.
App Store revenue, subscriptions, and payments have become reliable contributors, even when iPhone demand fluctuates.
Hardware sales are still uneven in some parts of the world, and smartphone replacement cycles are longer than in the past. Bernstein believes Apple's huge installed base allows it to keep making money from Services over time, no matter how big each hardware update seems.
The firm also highlighted Apple's strategy of returning capital to shareholders. Share buybacks and strong free cash flow are increasing earnings per share.
Apple is continuing to do what it does well, like keeping its margins strong and gradually expanding its services. The company is also planning to reduce its share count over time.
Apple Services is a steady cash flow
Bernstein believes there's potential for some extra help from product updates and AI features down the line. These additions are seen as stabilizers rather than big game-changers.
Essentially, the valuation is based on Apple's consistent performance rather than any single exciting breakthrough.
Where the optimism could be tested
The bullish case for Apple isn't without risks. Services growth is under regulatory pressure in many areas, and consumers are more price-sensitive now due to ongoing inflation and President Trump's tariffs.
However, hardware demand is still closely linked to the broader economy, especially outside the US.
Any hiccups in its most profitable areas could make its valuation tough to justify. However, Bernstein's price target suggests a belief that Apple's strategy is more resilient than skeptics think.
Updated February 11, 2:30 PM ET: Corrected analyst's name. AppleInsider regrets the error.
