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Apple Stock Jumps As KeyBanc Opens Coverage With 'Overweight' Rating, $191 Price Target

KeyBanc analyst Brandon Nispel initiated coverage of Apple with an 'overweight' rating and a $191 price target, citing strength in the tech giant's expanding services division.

Apple  (AAPL) - Get Apple Inc. Report shares moved higher Monday after analysts at KeyBanc Capital Markets initiated coverage of the world's biggest tech company with an 'overweight' rating and a $191 price target.

KeyBanc analyst Brandon Nispel argued Apple is growing its user base across all of its products and geographies, which should fuel growth in the group's key services unit while adding value to the broader Apple ecosystem. Apple CFO Luca Maestri told investors in late October that the companies installed base hit a record high in the fiscal fourth quarter, which ended in September, but did not disclose a specific figure. Analysts peg it at around 1.65 billion units, while Nispel puts the iPhone tally at around 1 billion.

Services revenues over the quarter rose 25.6% to a record $18.28 billion, while iPhone revenues surged 47% to $38.9 billion. 

"We see growth and margin upside, strong shareholder-friendly capital allocation, and potential for new products and services, which create a strong investment profile," Nispel said. "While Apple is expensive by historical valuations, we find AAPL attractive relative to other mega-caps given AAPL's superior ROIC characteristics."

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Apple shares were marked 2.5% higher in late-morning trading Monday to change hands at $165.20 each. The stock hit an all-time high of $170.30 last Wednesday. 

KeyBanc's bullish tone could offset concerns, linked to a report last week from Bloomberg News, that Apple has cautioned suppliers over waning iPhone demand heading into the peak of the holiday shopping season.

Bloomberg said Apple, which has already cut its new iPhone 13 production run owing to supply chain disruptions and chip shortages, is instructing vendors to prepare for tamer holiday sales thanks in part to Omicron concerns, delivery delays and the broader impact on consumer spending from the highest levels of domestic inflation in more than 30 years.

Last month, the Nikkei business newspaper said iPad production runs are about half of their normal pace over the past two months, owing to Apple's decision to prioritize chips for its new iPhone 13, which it expects to generate stronger demand over the holiday season.

Apple noted in late October that supply chain woes ripped $6 billion from its September quarter sales and expected the disruption to impact its current quarter revenues following a fourth quarter earnings report that included the tech giant's first miss of Wall Street sales forecasts in five years.