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Apple (NASDAQ:AAPL) has been experiencing somewhat of a bittersweet relationship with the ongoing pandemic-induced spatial distancing measures and lockdowns instituted throughout wide swathes of the globe. While the sale of its iconic iPhone handsets has been affected by these measures, the downside has been compensated, to a certain extent, by strong App Store sales. Given that a synchronized global lockdown now appears to be ending, analysts were expecting a gradual decline in Apple’s recent App Store boom. However, recent findings by Morgan Stanley (NYSE:MS) paint a far rosier picture, prompting the Wall Street powerhouse to upgrade the iPhone maker’s stock price target.

Morgan Stanley has now raised the stock price target for Apple to $340 from $326, constituting an upside potential of 4.94 percent relative to the current price level of $324 (as of 11:20 a.m. ET). Analyst Katy Huberty retained an ‘Overweight’ rating for the stock on the back of sustained strength in Apple’s App Store sales. As per Morgan Stanley’s estimates, the App Store sales have registered a 35 percent year-over-year increase in the current quarter through May. This level of growth is almost double the previous estimate put forth by the Wall Street behemoth.

Huberty wrote in an investment note:

"Last month, we predicted that April would mark the peak in App Store growth as countries began easing lockdown restrictions. However, high levels of engagement have sustained as the 'new normal' (at least in the near-to-medium-term) includes more time spent indoors, which should remain a tailwind to App Store performance."

Shedding light on the trend for the current quarter, Huberty noted:

"We are raising our June quarter App Store growth estimate to +32% Y/Y, which conservatively assumes that App Store growth slows to +25% Y/Y in the month of June.”

With the tabulation of a $500 million upside from the strength in App Store sales and the concurrent retention of its original forecast for other elements in Apple’s services segment, Morgan Stanley now believes that Apple’s services revenue will materialize at around $13.4 billion for the quarter ending in June, corresponding to year-over-year growth of 16.7 percent. Notably, this growth estimate is around 5 percentage points higher as compared to the previous prognostication by Morgan Stanley.

Crucially, Morgan Stanley now believes that Apple will be able to sustain the current momentum in its App Store sales, driving higher the bank’s forecast for the iPhone maker’s services revenue in 2020 and 2021 to “$54.1B (+16.9% Y/Y) and $63.7B (+17.8% Y/Y), respectively".

Of course, this development bodes well for Apple’s current strategy of emphasizing services as the key driver of growth in the top-line metric. As a refresher, Apple’s services segment includes Apple Pay, Apple Card, Apple News Plus, Apple TV Plus, etc. However, the bulk of the cash stream generated by this segment is derived from App Store sales, licensing, and AppleCare.

In a testament to the growing importance of the App Store to Apple’s financial health, the platform generated around $50 billion in revenue for the company in 2019, according to CNBC. This level of activity would place the App Store alone at the 64th ranking in a tabulation of the Fortune 500 companies, preceding the likes of Cisco (NASDAQ:CSCO) and Morgan Stanley.