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Cupertino-based tech giant Apple Inc. (AAPL) unveiled its long-awaited artificial intelligence (AI)-enabled iPhone 16 model last month. While this latest AI-powered model is definitely stirring excitement among iPhone enthusiasts worldwide, it hasn't quite reached the early success that some had hoped for. With no price increases from previous models, Apple is banking on AI features alongside a surge in consumer interest to drive revenue growth.
However, the appetite for AI-driven features hasn’t quite taken off with everyday consumers, leaving the tech giant reliant on its ability to reignite demand in a market that’s showing signs of hesitation. A recent CNET survey shows that consumers are far more interested in battery life, camera features, and storage capacity than AI enhancements, with only 18% citing AI as a reason to upgrade.
In fact, Apple's iPhone 16 pre-sales were off to a shaky start, with just an estimated 37 million units sold in the first weekend of pre-sales - a sharp decline of over 12% from last year's launch, as highlighted by analyst Ming-Chi Kuo of TF International Securities. The decline is particularly notable for the premium iPhone 16 Pro models, which are struggling compared to their iPhone 15 counterparts.
On a more optimistic note, while AI may not single-handedly ignite a major hardware refresh, Apple’s dedication to enhancing vital features like battery life and camera performance, coupled with easier year-over-year comparisons, could still lead to a modest uptick in sales.
Plus, new data out Friday points to unexpected signs of life for the iPhone in China, where Apple has faced a downturn in demand and rising competition. That could be an early sign that Evercore analysts are right when they say that Apple looks set to benefit from overly low expectations for the upcoming quarter.
About Apple Stock
Founded in 1976, tech powerhouse Apple Inc. (AAPL) stands as the undisputed leader in consumer technology innovation. With a remarkable lineup of iconic products, including the iPhone, iPad, Mac, AirPods, Apple Watch, and Apple Vision Pro, this “Magnificent Seven” company consistently sets the benchmark for seamlessly blending stunning design with exceptional functionality. With a jaw-dropping market cap of approximately $3.56 trillion, Apple holds the title of the world’s most valuable company.
Down only 2.3% from its October peak of $237.49, shares of this mega-cap stock have climbed roughly 33.6% over the past year and 22% on a YTD basis, roughly in line with the healthy returns delivered by the broader S&P 500 Index ($SPX) during both time frames.
Apple’s steadfast dedication to rewarding its shareholders shines through its remarkable track record of consistent dividend increases over the last decade. This commitment was taken to new heights in May when the tech giant made headlines with an astonishing $110 billion share buyback, the largest in U.S. history.
In fiscal Q3 alone, Apple demonstrated its shareholder-friendly approach by returning over $32 billion, which included $3.9 billion in dividends and a staggering $26 billion in share repurchases. On Aug. 15, the company paid a quarterly dividend of $0.25 per share, translating to an annualized dividend of $1.00 per share, which yields 0.42% at current levels.
Apple’s Q3 Earnings Beat Wall Street Projections
After Apple’s fiscal Q3 earnings exceeded Wall Street’s expectations, the company's shares clawed higher the following day, even amid a broader market sell-off. The tech titan posted a 5% year-over-year revenue increase, reaching $85.8 billion and narrowly surpassing forecasts, while EPS climbed 11% annually to $1.40.
A standout performer was the iPad, which delivered annual sales growth of nearly 24% to $7.2 billion, fueled by the launch of new models - the first in two years - that reignited excitement in this product line. Although iPhone sales dipped slightly to $39.3 billion, it remained a financial juggernaut, contributing a substantial 46% of the company’s total revenue for the quarter.
Apple boasted a solid cash reserve of $153 billion at the end of the quarter against a total debt of $101 billion, underscoring its robust financial position. While the company does not provide forward guidance, management hinted at steady revenue growth for Q4, projecting operating expenses to range between $14.2 billion and $14.4 billion and gross margins ranging from 45.5% to 46.5%.
With all eyes now on the iPhone maker’s Q4 earnings report, scheduled for Thursday, Oct. 31, investors are eager to see how Apple will continue to navigate the competitive landscape. Analysts are forecasting an 8.5% year-over-year increase in earnings to $6.65 per share for this fiscal year, followed by an additional 13.4% rise to $7.54 per share in fiscal 2025.
What Do Analysts Expect For Apple Stock?
Apple finds itself in a prime position to outperform Wall Street’s low expectations, as noted by Evercore analysts, who recently added the tech giant to their “Tactical Outperform list.” Amid the recently negative sentiment surrounding the stock, particularly regarding the Chinese smartphone market, Evercore sees potential for Apple to clear the low bar.
With a price target of $250, analysts believe the upcoming quarters could bring significant upside, driven by a mix of new product launches and a robust U.S. upgrade cycle, partially fueled by AI advancements. The analysts, led by Amit Daryanani, highlight that concerns over Apple's performance in China are “overstated.” While Huawei Technologies poses a potential challenge, its struggles with securing sufficient chip supply may hinder its competition with Apple.
Additionally, demand growth in developing markets and strong upgrade interest in the U.S. are expected to support Apple’s momentum, wrote the firm, and government stimulus in China could further boost overall smartphone demand, benefiting Apple in the process.
Beyond iPhones, Evercore’s bullish outlook extends to Apple’s Wearables and Services divisions, where new product launches like the Watch Ultra, AirPods 4, and USB-C AirPods Max are expected to drive revenue growth. Plus, gross margins could also see a positive impact, as a higher iPhone mix in the December quarter compensates for a relatively lower Services mix.
Overall, AAPL stock has a consensus “Moderate Buy” rating. Of the 32 analysts covering the stock, 18 advise a “Strong Buy,” four suggest a “Moderate Buy,” nine say it's a “Hold,” and one analyst advocates a “Strong Sell.”
The mean price target for AAPL is $245.13, indicating an upside potential of only 4.3% from current levels. However, the Street-high target price of $300 implies that the stock could rally 27.6% from here.
On the date of publication, Anushka Mukherji did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
