Apple stock received a new buy rating Thursday as a Wall Street brokerage issued a positive report on the company's growing services business.
Cowen analyst Krish Sankar initiated coverage of Apple (AAPL) with an outperform rating and a price target of 220.
Apple stock rose 1.1% to 183.73 on the stock market today.
"We view the services business as an investable long-term theme," Sankar said in a note to clients.
Apple Stock Deserves Higher Multiple: Analyst
Stabilizing iPhone sales, new product launches and capital returns also underpin his positive view of Apple stock, he said.
"Our long-term investment thesis hinges on the services segment growing and Apple massively monetizing its installed base of products," Sankar said. The company's services business includes the App Store, Apple Music, Apple Pay, iCloud and other offerings.
Apple is expected to announce a new streaming video service and subscription news service later this month.
Apple stock deserves a higher valuation multiple because of the recurring revenue model associated with services, Sankar said.
"If Apple can be successful in its forays in some of the moonshot opportunities such as health care, enterprise penetration, augmented reality, etc., it could further boost the blended multiple," he said.
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