Apple's Multi-Year iPhone Cycle And App Store Dynamics Are Growth Catalysts: Analyst

BofA Securities analyst Wamsi Mohan maintained a Buy rating on Apple Inc. AAPL with a price target of $256.

The analyst cited the multi-year iPhone upgrade cycle, tailwinds to gross margin, and strong cash flows as factors for rating reiteration.

The analyst writes that, as per SensorTower data, App Store revenues in first-quarter FY25 (after 64 days) rose to $5.6 billion, a 15.2% year-over-year increase. Total downloads (iPhone and iPad) grew by 7.4% year-over-year, reaching 6.1 billion.

In November, global App Store revenue increased by 15.8% year-over-year, with China showing a 9.0% year-over-year growth, adds the analyst.

Mohan writes that App store dollars per download also rose by 7.3% year-over-year.

Entertainment app revenue grew 35% year-over-year after 64 days and Gaming revenue increased 5% to $2.7 billion. Games remain the largest segment, followed by Entertainment (16%) and other categories, adds the analyst.

Mohan says this highlights a shift toward more diverse revenue streams as non-gaming apps monetize more. The impact of the new Apple Intelligence on download and revenue trends will be closely monitored.

The analyst projects total services revenue growth of 13% year-over-year for both first-quarter and second-quarter of FY25 and sees the resilience in services as a long-term positive indicator.

Mohan writes that 270 days after Apple’s compliance deadline, there has been minimal impact on web browser downloads in the EU.

The iPhone company reported fiscal fourth-quarter revenue of $94.9 billion, topping analyst estimates of $94.56 billion. Adjusted EPS of $1.64 surpassed forecasts of $1.60.

Price Action: AAPl shares are up 0.76% at $241.41 at the last check Tuesday.

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