On Tuesday, KeyBanc maintained its Sector Weight rating on Apple Inc. (NASDAQ:AAPL), without altering its price target.
"Our KFLD shows Indexed Spending -17% m/m in April, in line with the three-year average. Coming off below-average results in March, these results are modestly disappointing," said analysts at the firm in a note.
The firm's outlook on Apple remains cautious, highlighting several challenges. The forecast suggests that iPhone sales may be down to a mid-single-digit percentage, and while recent product launches in the Mac and iPad categories have provided some relief, these are seen as creating easy comparative figures rather than signaling a strong performance. Despite some investor enthusiasm around Apple's prospects in artificial intelligence, KeyBanc remains skeptical.
KeyBanc's assessment also emphasizes the ongoing decline in U.S. iPhone upgrade rates, increasing competition in China, and pressures on hardware margins as factors contributing to its cautious stance. Furthermore, the firm questions the expectations for growth to pick up in 2025. Apple's stock is currently trading at approximately 20 times KeyBanc's 2025 adjusted EBITDA forecast, a valuation deemed expensive both historically and in comparison to peers, especially given Apple's track record of negative hardware growth in recent quarters.
The firm's analysis suggests that Apple's stock may not be poised for significant growth in the near term, with the technology giant facing headwinds that could affect its financial performance. Despite the introduction of new products, the broader market conditions and competitive landscape present challenges that Apple will need to navigate moving forward.
InvestingPro Insights
As we consider the cautious outlook from KeyBanc on Apple Inc. (NASDAQ:AAPL), it's worth exploring additional metrics and insights that can provide a more comprehensive view of the company's position. Apple's management has been proactive in returning value to shareholders, as evidenced by a track record of raising its dividend for 12 consecutive years, which should appeal to income-focused investors. Moreover, Apple's stock has shown low price volatility, suggesting a level of resilience in the face of market fluctuations.
InvestingPro Data indicates a market capitalization of a staggering $2.88 trillion USD, reflecting Apple's immense scale and influence in the market. The company's P/E ratio stands at 28.98, which, while high, may be justified by its dominant position as a prominent player in the Technology Hardware, Storage & Peripherals industry. Additionally, Apple's revenue for the last twelve months as of Q2 2024 is reported at $381.62 billion USD, with a gross profit margin of 45.59%, highlighting the company's ability to maintain profitability.
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