Apple’s shares have reached an all-time high, hovering just below the impressive $200 mark. Despite a recent decline in year-over-year revenue for four consecutive quarters, three key factors suggest that Apple is poised to break through this barrier.
Analysts at Citi are confident that Apple’s stock will continue to rise, even with its recent struggles. They argue that the bears on the stock are overlooking the significant potential for gross margin expansion driven by iPhone premiumization, accelerated service sales, and the benefits of silicon insourcing. These trends are expected to continue into the next year, with additional support coming from the adoption of AI Phones and Vision Pro. Citi analyst Atif Malik emphasizes these points in his research note, where he expresses his belief in Apple’s growth potential by giving it a Buy rating and setting a target price of $230 on the stock.
Services as a Growth Engine
While Apple’s hardware products often dominate discussions about the company’s future, Malik argues that services play a crucial role as a growth engine. He predicts that services like Apple Care, iCloud, and other licensing services will experience rapid growth, reaching approximately 45% of total services revenue by FY2025. This significant increase in revenue from services is expected to further improve Apple’s overall gross margins.
The Future of iPhone Sales
The demand for iPhones remains a question of concern in the short term. However, Malik suggests that while Huawei may be resurging as a domestic rival in China, Apple can leverage its growth potential in emerging markets, particularly India. With its low penetration rate in India, Apple has the opportunity to drive iPhone sales and strengthen its position in this market.
In conclusion, despite recent challenges, Apple’s shares have reached an all-time high. Key factors such as gross margin expansion, the growth of services revenue, and the potential for increased iPhone sales in emerging markets indicate a positive outlook for Apple’s stock. As the company continues to innovate and expand its offerings, investors can look forward to the future with confidence.
A Promising Future for Apple
Apple has been the talk of the tech industry, with analysts weighing in on the company’s prospects. Despite concerns about competition from Huawei and broader market issues, Apple seems to be holding its ground. In a recent research note, Wedbush analyst Dan Ives stated that there hasn’t been a significant shift in the production of iPhone 15 for 2023. This suggests that Chinese consumers are still loyal to Apple, dispelling fears of a trend towards Huawei.
Ives maintains an optimistic outlook on Apple, setting a target price of $250 per share and an Outperform rating. This indicates his belief in Apple’s potential to deliver impressive performance.
Looking beyond the near-term, Citi’s Malik highlights the long-term potential for Apple in smartphones equipped with artificial intelligence capabilities. In a research note, Malik predicts that future developments in AI will enhance personal assistance and streamline day-to-day tasks, ultimately driving higher demand for processing power and storage. This could lead to further premiumization of Apple products. Malik expects these advancements to take effect after 2025 or 2026.
In addition to AI-enabled phones, Apple has another exciting prospect in its Vision Pro headset. UBS analysts estimate that the first generation of this device, priced at $3,499, could generate approximately $1.4 billion in revenue by fiscal year 2024. They predict this figure will rise to $3.2 billion by fiscal year 2025. UBS analyst David Vogt notes that the second-generation device will retain the same capabilities but will be smaller and lighter, thus offering enhanced comfort.
Taking a neutral stance, Vogt assigns a target price of $190 per share to Apple stock.
These insights paint an encouraging picture of Apple’s future, highlighting its ability to adapt and innovate. With its AI-equipped phones and cutting-edge devices like the Vision Pro headset, Apple continues to garner excitement among investors and consumers alike.