Trillion-dollar Apple could get 20% more valuable by the end of next year, JPMorgan says
- Apple could get 20% more valuable by the end of December 2019.
- JPMorgan initiated coverage of Apple with an "overweight" rating and price target of $272.
- It's growing services business is driving its upside, the bank says.
- Watch Apple trade here in real time here.
Apple's trillion-dollar market cap could grow by 20% by the end of next year.
That's according to JPMorgan analyst Samik Chatterjee, who initiated coverage of the tech giant with an "overweight" rating and $272 price target for December 2019. Apple's stock was up more than 2% following the news.
"While Apple's leadership position in the premium smartphone market is well understood by investors, we still see considerable upside to the stock from current levels," Chatterjee said in his Thursday note to clients.
Apple, classically a hardware and devices company, is in the midst of what looks a shift to services.
"Apple has historically been regarded as an IT Hardware company tied to a short product refresh cycle of the iPhone in an extremely competitive smartphone industry," Chatterjee wrote.
"More recently, investors have been proved wrong on the pace of Apple's transformation to a services company, with revenues in the Services reporting segment increasing from 8% of total in FY12 to an estimated 20% of total in FY21E."
The company's services business includes App Store, Apple Music and Apple Pay. Apple also plans to expand its media offering with video and print media content.
According to the JPMorgan, the company could potentially see more acquisition activity in near future.
"Apple's interest in entering new end-markets is likely to be evaluated based on the opportunity to offer services on a large installed base," he said. "Certain end-markets in our view could be of interest, including gaming services, automotive services, and smart speakers."
Chatterjee also points out that a combination of stronger-than-expected price increases in the core iPhone business, continuous innovation disrupting new markets, a strong balance sheet, and share repurchases could boost shares by the end of next year.
Apple has been one of the top-performing S&P 500 stocks this year, gaining more than 30%.
