Apple’s Stock Climbs on iPhone Strength, But Analyst Opinions Remain Divided
Goldman Sachs analyst Rod Hall has maintained a Buy rating on Apple Inc AAPL and raised the price target from $265 to $275. Hall believes that Apple is on the cusp of a multi-year replacement cycle for the iPhone, driven by the company’s solid third-quarter earnings, which were powered by strong iPhone sales and continued momentum in services. This positive outlook comes despite other analysts having a more cautious stance on the stock.
Key Takeaways:
- Goldman Sachs: Predicts a multi-year iPhone upgrade cycle, citing strong third-quarter earnings and continued services growth.
- KeyBanc: While acknowledging strong third-quarter results, expresses skepticism over a significant acceleration in the upgrade cycle and cautions about China competition.
- Piper Sandler: Maintains a Neutral rating, noting that iPhone revenue was down year-over-year in the June quarter despite the install base reaching record highs.
- BofA Securities: Remains optimistic with a Buy rating, expecting a strong iPhone upgrade cycle in fiscal years 2025 and 2026, driven by the potential for higher services revenue, increasing margins, and AI features.
- Apple: Expects 5% year-over-year revenue growth in the fourth quarter, including a 13% increase in services revenue, indicating continued strong demand for its products.
Bullish Bets on iPhone Growth and Apple Intelligence
Hall’s bullish stance is based on the belief that Apple is entering a multi-year iPhone upgrade cycle fueled by the strong third-quarter results. He points to the company’s strong services revenue growth, exceeding analysts’ expectations, and the fact that Apple ended the quarter with channel inventory at the low end of its target range for iPhone and iPad. This suggests strong demand for Apple products and the potential for continued growth.
Hall also highlights the importance of Apple Intelligence, the company’s AI-powered platform that can support the latest iPads and Macs. He believes that Apple’s fourth-quarter revenue guidance of 5% year-over-year, including 13% growth in services revenue, indicates strong demand for iPhone and other products. This is further supported by Apple’s expectation of record-high gross margins in the fourth quarter, which Hall attributes to the high margins on iPhone sales and the ongoing expansion of services gross margin to the mid-70% range.
BofA Securities’ analyst Wamsi Mohan also shares a positive outlook, citing the expected strong iPhone upgrade cycle in fiscal years 2025 and 2026. He expects higher services revenue growth alongside higher margins from Apple’s increasing use of its own silicon, and he believes the AI features of Apple Intelligence will attract institutional investors. Mohan projects a conservative revenue guidance of $94 billion, noting the potential for a significant increase in unit sales in the December quarter and in fiscal 2025 with the full rollout of Apple Intelligence.
Cautious Notes on Upgrade Cycle and China Competition
While some analysts are optimistic about Apple’s future, others are taking a more cautious approach. KeyBanc analyst Brandon Nispel maintains a Sector Weight rating, acknowledging the strong third-quarter results but expressing skepticism about a significant acceleration in the upgrade cycle. He notes that Apple’s guidance aligned with expectations, and his conversations with carriers suggest a more gradual replacement rate than the bulls anticipate.
Nispel also highlights China competition as a factor limiting his enthusiasm, noting that his model continues to call for less growth than consensus.
Similarly, Piper Sandler analyst Matt Farrell maintains a Neutral rating, flagging that while Apple delivered June quarter results slightly ahead of expectations, iPhone revenue was down 1% year-over-year despite the install base reaching new all-time highs. He remains cautious about consumer spending in the second half of the year, despite management’s excitement about the Apple Intelligence opportunity.
Beyond the iPhone: The Potential of Apple Intelligence
While the iPhone remains a key driver of Apple’s revenue, the company is also focused on expanding its services ecosystem and exploring new technologies like AI.
The rollout of Apple Intelligence has generated considerable excitement. This AI-powered platform, capable of supporting the latest iPads and Macs, represents a significant shift for Apple and a potential driver of future growth. The impact of Apple Intelligence on the iPhone upgrade cycle and the broader market remains to be seen, but it is a key factor that analysts are closely watching.
Conclusion: A Mixed Outlook with Potential for Growth
The analysts’ views on Apple Inc. AAPL demonstrate a mixed outlook, with some analysts seeing strong potential for growth driven by the iPhone and Apple Intelligence, while others are more cautious about the upgrade cycle and the competitive landscape.
While the short-term outlook for iPhone revenue remains uncertain, the potential for sustained growth in services revenue and the introduction of new technologies like AI suggest that Apple is well-positioned for future success. With the upcoming launch of the iPhone 16, investors will be closely watching to see how consumer demand shapes up and how Apple’s AI strategy plays out.
