On Friday, Citi has increased its price target for Apple Inc. (NASDAQ:AAPL) shares to $255.00, up from the previous $210.00, while reiterating a Buy rating for the technology giant. The adjustment follows Apple's recent financial results, which surpassed expectations with a forecast of $94 billion in sales and earnings per share (EPS) of $1.59 for the September quarter. Additionally, iPhone sales showed a year-over-year increase of 2.5%, which is higher than the 1% growth anticipated by Wall Street.
The optimism from Citi stems from positive reactions to the early versions of iOS 18 and the Apple Intelligence features introduced earlier this week. The firm believes that Apple's focus on artificial intelligence (AI) will significantly contribute to an appealing iPhone upgrade cycle. Despite these advances, Citi predicts only a slight increase in iPhone 16 sales, estimating around 85 million units for the calendar year 2024, which represents a 1% decrease year-over-year.
Citi anticipates a more substantial impact with the major update planned for iPhone 17 the following year. The forecast for 2025 suggests approximately 92 million units could be sold, marking a 6% increase year-over-year. The firm notes that it may take time for consumers to recognize the value of an AI-powered smartphone and for developers to create applications that leverage the new technology.
In light of these projections, Citi has raised its EPS estimates for fiscal years 2024, 2025, and 2026 by 3%, 4%, and 3%, respectively. The new price target of $255 is based on a consistent 30x price-to-earnings (P/E) ratio on the company's expected EPS for fiscal year 2026.
In other recent news, Apple Inc. has been making significant strides despite facing a few challenges. The company's third-quarter results for the fiscal year 2024 showed a notable recovery in iPhone sales, particularly in the Americas and Europe. DA Davidson responded by raising its price target on Apple's shares to $260 from the previous $230, maintaining a Buy rating. The firm's analysis points to the continued appeal of Apple's products and the company's ability to innovate as key drivers for its positive outlook.
However, Apple's sales in China fell by a steeper-than-expected 6.5%, a significant development given that China represents a fifth of Apple's total revenue. Despite this setback, Apple reported a 4.9% increase in revenue for the fiscal third quarter, reaching $85.78 billion and surpassing the average analyst estimate. The company's earnings per share also exceeded Wall Street consensus at $1.40.
Apple is currently facing a lawsuit filed by federal and state antitrust regulators accusing the company of maintaining an illegal monopoly in the smartphone market. Apple has requested a U.S. judge to dismiss the case.
InvestingPro Insights
Following Citi's optimistic outlook on Apple Inc. (NASDAQ:AAPL), investors may find additional context in the real-time data and analysis provided by InvestingPro. With a substantial market capitalization of $3.35 trillion, Apple stands as a behemoth in the tech industry. The company's P/E ratio, a measure of its current share price relative to its per-share earnings, is currently at a high 33.7, indicating investors' willingness to pay a premium for its shares, possibly due to their confidence in Apple's consistent performance and growth prospects.
Despite a slight revenue decline of 0.9% over the last twelve months as of Q2 2024, Apple maintains a robust gross profit margin of 45.59%, showcasing its ability to retain a significant portion of its sales as profit. Moreover, the company's EBITDA has grown by 4.72% during the same period, reflecting its operational efficiency and profitability. According to InvestingPro Tips, Apple has not only raised its dividend for 12 consecutive years but also operates with a moderate level of debt, which can be reassuring for investors concerned with financial stability.
For those considering Apple's stock, it's worth noting that the company's shares have shown a strong return over the past three months, with a 26.37% increase, and analysts have revised their earnings upwards for the upcoming period. With 17 additional InvestingPro Tips available, including insights into Apple's dividend sustainability and valuation multiples, investors can explore further at https://www.investing.com/pro/AAPL for a comprehensive understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.