Jefferies gives Apple stock a 'buy' rating because of the company's "stable iPhone business" giving it the capacity to build a massive, recurring, and high margin Service business, analyst Timothy O'Shea stated in a note on Monday.
This was the first time that the firm rated Apple stock after a three-year break in covering its movement, according to AppleInsider.
Jefferies gave a $265 share price target on Apple stock, believing that its services business would account for 25 percent of the company's revenue by the fiscal year 2020. Apple's service business could also account for as much as 40 percent of Apple's gross profit for the same fiscal year.
O'Shea said Apple's business service has a "higher multiple compared to the lower-margin hardware business." The investment firm said it saw a significant opportunity for investors as service business alone could be worth $117 to $177 per share by the fiscal year 2020.
America Merril Lynch analyst Wamsi Mohan, meanwhile, reduced his price target for Apple stock to $235 for $256. The analyst said yuan's movement at present could make iPhones more expensive in China.
Sales in China accounted for 18 percent of Apple's revenue in its third quarter ended June 30.
Hence, Mohan also reduced his estimates for iPhone sales for the December quarter to 73 million units from 77 million units.
Nevertheless, the analyst also gave Apple stock a "buy" rating, echoing Jefferies' forecast about the Apple's services business growth. Additionally, Mohan highlighted Apple's strong stock buybacks and dividends.
On the other hand, Goldman Sachs analyst Rod Hall gave Apple stock a "neutral" rating and reaffirmed a $240 share price target.
Apple is scheduled to report its fiscal fourth-quarter earnings on Nov. 1.
In July, Apple reported its third-quarter revenue of $53.3 billion, an increase of 17 percent from the year-ago quarter. The company also reported quarterly earnings per diluted share of $2.34, up to 40 percent. The company said at the time that international sales accounted for 60 percent of the quarter's revenue.
Apple had also provided guidance for its fiscal 2018 fourth quarter after reporting its third-quarter results back in June. The company aims to increase revenue between $60 billion and $62 billion, with gross margin between 38 percent and 38.5 percent.
The tech giant has a scheduled launch event on Oct. 30 where it is rumored to be announcing two new iPad Pro models, an updated version of the MacBook Air, the iMac, iMac Pro, the 12-inch MacBook Pro, as wells as the Mac Mini, and the wireless charger, Air Power.
