Monday saw Apple Inc. (NASDAQ:AAPL) maintain its Outperform rating and a solid $220.00 stock price target from Evercore ISI, following a notable increase in App Store revenue growth. The tech giant's digital storefront saw a 12% revenue uptick in May, surpassing April's 9% growth rate. This acceleration occurred despite new regulatory changes from the EU's Digital Markets Act (DMA) that could have potentially hindered performance.
In a positive turn, European Union App Store revenues surged by 25% in May, a slight increase from the 22% growth observed in April. The sustained growth trajectory has led to the App Store's June-quarter revenue tracking ahead of initial projections, potentially signaling an upside to the consensus growth estimate of 11% for Apple's broader Services sector.
The analyst highlighted that as long as growth remains within the high single to low double digits, reaching the 11% target for the overall Services business should be attainable. The App Store, along with Google (NASDAQ:GOOGL) payments, are considered major pillars of this segment. The expectation is that newer, rapidly expanding services will continue to bolster growth, keeping it in the double digits.
China has emerged as a significant contributor to month-over-month revenue growth, with a 10% rise in sales in May compared to a 4% increase in April. Despite the anticipation of tougher comparisons as the quarter progresses and the rest of the 2024 calendar year unfolds, the predicted deceleration in growth has not yet materialized.
In summary, the second month of the quarter has shown encouraging signs for Apple's Services business. If the App Store can maintain its double-digit growth trajectory through June, there may be potential for exceeding the consensus expectations for this key segment of Apple's business. The Outperform rating and $220 price target remain firmly in place, reflecting confidence in the continued robust performance of the company's services.
InvestingPro Insights
Apple Inc. (NASDAQ:AAPL) continues to demonstrate its prowess in the tech market, not only through its service sector growth but also through its financial and market performance. According to InvestingPro data, Apple boasts a towering market capitalization of $2.97 trillion USD, affirming its status as a behemoth in the industry.
The company's P/E ratio stands at a robust 29.95, indicating investor confidence in its earnings potential despite a slight decline in revenue growth over the last twelve months, which was at -0.9%. The resilience of Apple's stock is further underscored by its low price volatility, an InvestingPro Tip that suggests stability in its market performance.
Investors may also take note of Apple's dividend track record, having raised its dividend for 13 consecutive years—a testament to its financial health and commitment to shareholder returns. Moreover, Apple's cash flows are more than adequate to cover interest payments, a crucial factor in assessing the company's financial sustainability.
For those interested in exploring more about Apple's financial outlook, InvestingPro offers additional tips and insights. In fact, there are 15 more InvestingPro Tips available for Apple, which can be accessed through the InvestingPro platform. For a deeper dive into these insights, readers are invited to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, further enriching their investment strategy with expert analytics and real-time data.
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