On Tuesday, KeyBanc Capital Markets maintained its Sector Weight rating on Apple Inc. (NASDAQ:AAPL) stock, citing both an increase in iPhone 16 production forecasts and recent financial data. The firm adjusted its financial estimates for Apple's third fiscal quarter and the full years of 2024 and 2025 following new industry checks and metrics from its Key First Look Data (KFLD).
According to the latest KFLD report, Apple's Indexed Spending in June saw a month-over-month increase of 14%, surpassing the three-year average. This growth was attributed to stronger-than-anticipated results, continuing the positive trend observed in May. For the third fiscal quarter, the KFLD indicated that Indexed Spending declined by 5% quarter-over-quarter, which is less than the three-year average decline of 12%, largely due to the introduction of new products.
Despite the positive indicators, the firm noted that year-over-year results are still on the decline. Discussions with carriers have revealed that upgrade rates remain low, leading KeyBanc to consider current estimates for a rise in U.S. upgrade rates to be overly optimistic and premature. The firm expressed caution, suggesting that expectations for an uptick in growth late in the fiscal years of 2025 and 2026 might be too high.
KeyBanc also pointed out that Apple's stock is currently trading at approximately 24 times the firm's projected 2025 adjusted EBITDA. This valuation, according to KeyBanc, is too high to justify increased optimism or investment activity, leading them to maintain a cautious stance on Apple's near-term growth prospects. The firm's analysis suggests that the consensus on a growth inflection in the later part of fiscal year 2025 and into fiscal year 2026 may not be as imminent as some expect.
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