Apple Stock Dips on Mixed Outlook, Analysts Eye AI as Key for Growth
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Apple (AAPL, Financials) shares fell around 2% premarket Friday following a cautious fiscal Q4 outlook that received mixed reactions from analysts.
While noting expected declines in iPhone production in the December quarter, Morgan Stanley maintained an Overweight rating with a $273 price target, pointing to good gross margins and accelerating Services.
Apple's shares may stay range-bound in the near term, with limited downside, according to Erik Woodring's team at Morgan Stanley Positive December quarter results depend on consumer reaction to Apple Intelligence, Apple's artificial intelligence capability, during the first rollout.
Apple's income projection for fiscal Q1 2025 was lower than expected, even if its gross margins exceeded consensus projections. Although analysts project 3-4 million iPhone build cuts for the quarter, Apple income should remain rather flat. Still, they expect early involvement with the iPhone 17 cycle and see limited negative impact with manufacturing cuts now reflected in more general forecasts.
Reiterating a Buy rating, Bank of America set a $256 price target. Strong Q4 iPhone demand was noted by BofA analysts under Wamsi Mohan, although Services income lagged expectations somewhat. Apple's Q1 revenue projection was flagged by them as cautious, influenced by Apple Intelligence's staggered release and other new product features. Apple's 46% to 47% gross margins, expected by BofA, reflect both high iPhone sales and component cost efficiencies.
Analysts' projection for Q2 points to ongoing high margins combined with a growing Services mix.
This article first appeared on GuruFocus.