Can the apple stock continue to rise? This metric.

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In April, Goldman Sachs analyst Rod Hall moved away from his long-term bearish stance on

Apple

stocks, upping its Hold from Sell rating, and conceding that its previous opinion that iPhone sales would be disappointing during the pandemic was “clearly wrong.” He also admitted at the time that sales of Macs and iPads had far exceeded expectations.

But Hall still has some concerns about Apple’s outlook (ticker: AAPL), as evidenced by its target price of $ 140, about $ 10 below the recent price. On the one hand, he thinks Street’s estimates for next year are just too high. Hall forecasts revenue for the September 2021 fiscal year of $ 371.7 billion, about $ 5 billion more than Street’s consensus, and up 35% from fiscal 2020. But he sees the Fiscal 2022 revenue fell 4% to $ 356.5 billion, a projection of $ 23 billion below Street’s consensus of $ 379.5 billion.

Hall provided information on this thinking in a new research note on Tuesday, with a particular focus on Apple’s ability to increase average revenue per user. Hall writes that his overall vision for Apple is that stable revenue per user combined with “maximized” global user penetration is expected to result in slower overall revenue growth, which is reflected in his guidance for fiscal 2022.

But he noted that Covid provided multiple impulses to Apple’s ARPU, which he said will increase by 21% over the two-year period until the end of 2021. (This reflects his estimate of 19% ARPU growth rate over the 2021 timeline, after growing 2% in 2020.) The impressive growth stems from both rising iPhone, Mac, iPad and Wearable revenues, as well as high service revenues , due in part to faster downloads from the App Store.

But he sees that trend reversing as spending habits return to normal over time as the pandemic abates.

Hall concedes that it is difficult to predict the behavior of Apple users in the short term. Covid created tough lineups for Apple, driven by onward demand for hardware, above-average App Store spending, and a clear preference for high-end versions of the iPhone and other hardware. He also says investors need to consider high levels of consumer savings and the growing value of Apple products, as well as more flexible work and study behavior. But he still believes that in the long run, Apple will either need to increase ARPU or accelerate subscriber growth trends to keep revenue growth above GDP growth.

For the 2022 timeline, Hall sees average revenue per user drop about 12% year-over-year, largely due to an expected moderation in hardware sales. It predicts that iPhone revenue will fall 12% in 2022, after growing 37% in 2021, with units down 3% and average selling prices down 9%. He sees in 2022 revenue drops of 9% on Macs and 8% on iPads. And it sees service revenue growth slowing to 6%, from 24% growth in 2021, with a pickup in ad spending partially offsetting tough comparisons for the App Store.

Hall also argues that investors would be better off looking at ARPU trends than trying to discern unit volumes, especially since the company has not actually provided product unit data since the end of fiscal 2018. He believes that given the lack of hard unit data, “the data sources that many investors rely on to forecast Apple’s revenue over time have become less accurate. . “

Apple shares lost a few cents on Tuesday to $ 149.63, about $ 2 below their intraday high of $ 151.68.

Write to Eric J. Savitz at [email protected]