- Deutsche Bank analyst Sidney Ho kept a Buy rating on Apple Inc (NASDAQ:AAPL) with a $210 price target (22% upside).
- The re-rating follows the iPhone maker offering a hardware subscription service for its devices.
- A hardware subscription would be financially accretive to Apple, although likely only modestly in the short term.
- However, more important than the short-term earnings accretion is the opportunity to reset consumer expectations of how often to refresh an iPhone and to get more consumers to try other Apple subscription services, says the analyst.
- If the hardware subscription service gains meaningful traction, he could see Apple's valuation re-rate higher "as investors give a higher valuation for the more traditional recurring revenue business model."
- Other analysts also hailed Apple's foray into subscription services.
- Apple's services business grew 27% in 2021 to $68.4 billion.
- Apple's Apple Business Essentials helped businesses set up, manage and install software on workers' iPhones, iPads, and Macs. It targeted the smaller customers, primarily those without dedicated IT departments.
- Price Action: AAPL shares traded lower by 0.14% at $171.90 in the premarket on the last check Friday.
