BofA Securities analyst Wamsi Mohan has decided to uphold a Buy rating on Apple Inc., setting a price target of $256, due to positive indicators in various aspects of the company's performance. Mohan particularly mentions the ongoing multi-year iPhone upgrade cycle, the tailwinds contributing to gross margin growth, and the robust cash flows as reasons for maintaining the positive rating on Apple.
Mohan references data from SensorTower, indicating that in the first quarter of fiscal year 2025, App Store revenues after 64 days saw a 15.2% year-over-year increase, amounting to $5.6 billion. Additionally, total downloads for iPhone and iPad combined grew by 7.4% year-over-year, reaching 6.1 billion. The analyst also notes that global App Store revenue in November showed a 15.8% year-over-year increase, with China contributing a 9.0% year-over-year growth.
The BofA Securities analyst further highlights that the revenue per download in the App Store saw a 7.3% year-over-year rise, indicating positive trends in monetization. Noteworthy growth was observed in the entertainment app revenue, which surged by 35% year-over-year, and gaming revenue, which increased by 5% to $2.7 billion, maintaining games as the leading revenue segment followed by entertainment and other categories. Mohan emphasizes a shift towards more diverse revenue streams as non-gaming apps find greater success in monetization.
Looking ahead, Mohan anticipates a 13% year-over-year growth in total services revenue for both the first and second quarters of fiscal year 2025, viewing this resilience in services as a positive indicator for the company's long-term performance. Moreover, the impact of the new Apple Intelligence on download and revenue trends is anticipated to be closely monitored as part of the ongoing analysis of Apple's growth trajectory.
In assessing the company's compliance deadline effects, Mohan points out that 270 days after the stipulated compliance period, there has been minimal impact on web browser downloads in the EU, indicating a smooth transition for Apple. Apple recently reported fiscal fourth-quarter revenue of $94.9 billion, surpassing analyst estimates, with an adjusted EPS of $1.64 outperforming forecasts of $1.60. Apple's shares have responded positively to these developments, showing a 0.76% increase at $241.41 at the last check on Tuesday.