Apple Inc will likely see a surge in services revenue in the third quarter of this year, charged by app store developer revenue and renewed growth in China, critical areas for the future as the iPhone maker faces a maturing smartphone market, Evercore ISI said yesterday.
Rosenblatt Securities on Monday downgraded Apple shares to “sell” from “neutral,” citing the probability of disappointing new iPhone sales.
With Apple focusing more on the services business, Evercore said it expects total App Store developer revenue to grow 18 percent to about US$9 billion in the third quarter.
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Apple is due to report results on July 30.
“We think there is likely upside ahead when it comes to services revenues in the June quarter, driven by a sizable acceleration in China-centric markets,” analyst Amit Daryanani said in a note.
China is a key market for Apple as well as a major production center for its devices. The company earned nearly 18 percent of its total revenue from Greater China in the quarter that ended in March.
“The reacceleration of growth in China is encouraging, while most other growth trends held stable,” Daryanani said.
China and services revenue would be key areas as the company shifts its strategy from focusing on hardware sales.
App Store is a key driver of Apple’s services segment, which brought in US$37.1 billion in revenue last year.
The company had earlier this year attempted to reintroduce itself as an entertainment and financial services company with new launches, including a TV streaming service.
JPMorgan Chase & Co in a note on Monday turned positive on its volume outlook for iPhone shipments next year. The bank raised its price target on the stock to US$239 from US$233.
Apple shares closed down 2.1 percent at US$200.20, after Rosenblatt analyst Jun Zhang (張軍) said “new iPhone sales will be disappointing.”
He expects the company to face “fundamental deterioration” in the next six to 12 months.
Evercore and JPMorgan have a “buy” or higher rating on the stock.
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