FBR Keeps $185 Price Target On Apple As Music Service Goes Public

In a report published Monday, FBR & Co. analyst Daniel Ives maintained an Outperform rating on shares of Apple Inc. (NASDAQ: AAPL) with an unchanged $185 price target ahead of Tuesday's launch of its much anticipated streaming music service.

Users of Apple Music will ultimately be able to purchase the streaming music service for either $9.99 per month for an individual plan or $14.99 per month on a family plan and access over 30 million songs.

"We see streaming music as the tip of the iceberg for Apple, as the company looks to prove the merits of its Beats acquisition and ultimately embark further down the software/streaming services path over the coming years, helping to expand its massive market opportunity," Ives wrote. "We believe the company's massive installed base (e.g., iTunes) and ability to access/pay for high-quality content position Apple to gain significant market share versus incumbent vendors (e.g., Spotify, etc.) in the streaming music space."

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Ives continued that Apple's expansion to streaming music represents a "critical component" of its growth strategy and will add upside potential to growth prospects over the coming 12 to 18 months. In fact, Apple's single greatest opportunity for profit growth over the coming years lies in the company's ability to leverage its ecosystem through greater adoption. Accordingly, the launch of Apple Music is "another step in the right direction."

Ives added that he believes Apple is "ironing out" work on a similar streaming service, but in television. The analyst noted that the company will "continue to head down that path" with a possible announcement due in the next few months.

Bottom line, while Apple remains "laser-focused" on iPhone 6 and China "hyper growth" in the near term, the company's new music streaming service "fits well" into its ecosystem and represents a "natural evolution" from its iTunes platform.