7 Apple Analysts Size Up Q2 Results: Artificial Intelligence 'A Major Upgrade Cycle Within Product Categories Such As The iPhone'

Zinger Key Points
  • The iPhone sales in China and future iPhone models remain a key to Apple's stock price, analysts said.
  • Analysts remain excited to hear more about Apple's Gen AI efforts in coming months.

Technology giant Apple Inc AAPL reported second-quarter financial results that saw revenue and earnings per share beat Street estimates.

Analysts have responded to Apple’s results, updated guidance, increased dividend, and the announcement of a $110 billion buyback.

The Apple Analysts:

  • Bank of America analyst Wamsi Mohan has a Buy rating and raises the price target from $225 to $230.
  • Goldman Sachs analyst Michael Ng has a Buy rating and $226 price target.
  • Keybanc analyst Brandon Nispel has a Sector Weight rating and no price target.
  • Needham analyst Laura Martin has a Buy rating and $220 price target.
  • DA Davidson analyst Gil Luria has a Neutral rating and $200 price target.
  • Rosenblatt analyst Barton Crockett has a Neutral rating and raises the price target from $189 to $196.
  • Piper Sandler analyst Harsh Kumar has a Neutral rating and $190 price target.

Related Link: Apple Delivered Much Better-Than-Feared ‘Jalen-Brunson-Like’ Quarter, Says Bullish Analyst: Why Betting Against Cupertino Is A ‘Wrong Move’

Bank of America on Apple: A multi-year upgrade cycle for Apple makes the stock a top pick for Mohan.

"Apple reported a strong quarter with many positives," Mohan said.

The analyst said third-quarter revenue guidance could be conservative with upside from Apple's Services and Accessories segments.

Mohan sees an iPhone upgrade cycle coming, driven by GenAI. The analyst also said Apple is growing iPhones in China and easing fears from investors.

The analyst highlights the AI opportunity for Apple.

"We expect Gen AI related features for iOS18 at WWDC in June and then at the iPhone event in Sep. We expect Apple to continue investment in its own Silicon and focus on integrating hardware, software and services to fully monetize the Gen AI opportunity."

Goldman Sachs on Apple: Strength of Apple's Services and iPhone were keys in the second quarter for Ng.

"We gain confidence in our Buy rating with AAPL demonstrating the strength of its ecosystem and allaying several key concerns."

The analyst said Apple showed improving trends in Greater China, including iPhone growth.

"In our view, F2Q24 provides demonstrable momentum across AAPL's key categories and clears the way to a catalyst-rich NTM including increased clarity in AAPL's generative AI initiatives, new products and ongoing Services momentum."

Ng said Apple's installed base is "underappreciated" and the company's revenue per user could be improved in the future.

KeyBanc on Apple: Artificial intelligence is a key item for Apple going forward, according to Nispel. The analyst is not convinced that consumers will rush out to buy new Apple AI devices like investors believe.

"While F3Q guidance was better than feared, we believe it's more driven by new product introductions in Mac/iPad, as we believe is implied by the guidance iPhone is down MSD," Nispel said.

The analyst expects soft upgrades for replacement cycles in the U.S. and increased competition in China to weigh on the iPhone going forward.

"AAPL's user base is growing across products and geographies; its user growth fuels growth in Services, creating an ecosystem that gives AAPL a competitive advantage, which should support AAPL's margin expansion and capital allocation."

Needham on Apple: Guidance, margins, share buybacks and China were keys in Apple's second quarter results for Martin.

"On China, AAPL stated that iPhone unit sales rose in mainland China vs channels checks of down 13% to 18%," Martin said.

One area of concern for Martin is Apple's commentary on generative AI.

"AAPL's GenAI commentary continues to be very weak (our view). Investors we talk to believe that GenAI is the next technology disruption, and AAPL continues to focus its commentary on the last disruption, which was mobile."

Martin said Apple could be quiet about its GenAI ambitions, but capex spending guidance suggests it isn't increasing spending on the growth area.

The analyst said Apple was the biggest beneficiary of the consumer shift to mobile devices and could be slow in the "3rd technological disruption cycle."

DA Davidson on Apple: The second quarter was solid for Apple with a beat on revenue and earnings per share, Luria said.

The analyst is looking for more from Apple coming soon, turning attention to WWDC in June and more commentary on Apple's Generative AI efforts.

"We expect Apple to delivery meaningful announcements surrounding the implementation of generative AI across their ecosystem, which we believe can help catalyze a major upgrade cycle within product categories such as the iPhone," Luria said.

Luria also highlighted Apple's Services segment in the new investor note.

"We continue to believe that this growing segment of revenue can help moderate growth for Apple moving forward, with a large user install base that includes over 1 billion paid subscriptions across the services on their platform."

Rosenblatt on Apple: Better-than-feared guidance from Apple was a highlight in the earnings report for Crockett.

The analyst said Apple's iPhone sales in China for the second quarter completely brushed off third party research estimates.

"In addition to growth in iPhone in China, Apple is bragging of setting sales record in major emerging markets globally, including India," Crockett said.

Crockett said Apple stock is best when it trades based on disruptive innovation.

"The only real investable opportunity is gen AI, where Apple plans announcements for its WWDC in June and can leverage its skill with the hardware/software integration and proprietary neural chips and privacy."

Crockett said Apple's risk is that its Gen AI efforts are not appealing enough.

Piper Sandler on Apple: Headset concerns were the major item from Apple's second quarter, analyst Kumar is centering in on.

"The primary point of contention for Apple investors appears to be slowing handset growth in China, to which we point out that within China specifically the iPhone segment was down ~8%," Kumar said.

The analyst said Apple's quarter strength and reason for the stock being up is likely the Services segment, $110 billion buyback and better than expected results in China.

"Fundamentally we would like to see further improvements in iPhone trends before getting involved."

AAPL Price Action: Apple shares are up 7% to $185.22 on Friday, versus a 52-week trading range of $164.08 to $199.62.

Read Next: Despite Tim Cook’s Scant Details About iPhone AI, Tesla Investor Ross Gerber Thinks It Will Trigger ‘Whole New Upgrade Cycle’

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