Apple could get a big boost from its services business, according to Goldman Sachs. Analyst Michael Ng initiated coverage of the big technology stock with a buy rating and a price target of $199. His price target implies the stock could rally 31.8% from where it closed Friday. Ng said investors may be incorrectly focusing on slowing product growth, which masks what he sees as an opportunity for the company to expand its services business. He said improvements in the services business, paired with product innovation and growth in the base, should offset headwinds from reduced demand for phones, tablets and Macs. “The majority of gross profit growth over the next 5-years should be driven by Services, which should mark an inflection point in the Services investment narrative and support AAPL’s premium multiple,” he said in a note to clients Sunday. “The durability of Apple’s installed base and the resulting revenue growth visibility from attaching more Services and Products is what underpins the recurring revenue – or Apple-as-a-Service – opportunity.” Apple has unmatched brand strength, according to Ng. That brand loyalty can help the company grow its user base, which in turn can ensure lower churn and repeat purchases as newer technology models come out. Ng pointed to Apple TV+ and Apple Fitness of two examples of product and service launches. Continued penetration in the smartphone market in both mature and newer markets will help expand that user base going forward, Ng said. Growth of 5G and the used-phone market will also help increase Apple’s reach, he said. Ng said Apple’s trade-in program can also help make the iPhone a better value. Ng said Apple’s valuation is attractive relative to its historical multiple and compared to key peers within tech. The stock is up 1% in Monday’s premarket and has gained 16.2% this year after falling 26.8% in 2022. Apple’s services business should see an 11% compound annual growth rate through at least the end of fiscal 2026, Ng said, resulting in $117 billion in revenue compared with $78 billion in fiscal 2022. A key driver of that growth should come from a 3% compound annual growth rate in the volume of iPhone users and a 7% compound annual growth rate in average revenue per user. That will help contribute to a 10% compound annual growth rate in per-share earnings expected between fiscal years 2022 and 2026, helped by earnings durability and share repurchases. To be sure, Ng said Apple’s performance could be impacted by slides to consumer demand, supply chain disruption, increased competition and any regulatory or capital allocation difficulties. While he said product revenue faces near-term headwinds, average revenue per user should return to historical levels as new products like headsets can help offset losses due to the fact that people are keeping their iPhones for longer than they used to before replacing them. — CNBC’s Michael Bloom contributed to this report.