Here's what analysts say to do with Apple stock from here on out

Published Fri, Nov 3 202311:33 AM EDT

Analysts aren't ready to take their foot off the pedal when it comes to Apple — even after the dominant smartphone maker warned of softening demand for the December quarter. Apple continues to appease investors who are planning on holding the stock for the long term. Several analysts were impressed by Apple's resilience amid a tougher macroeconomic environment, pointing to year-over-year growth in iPhone sales and a more than 16% increase in services revenue from a year earlier. Such bright spots were the driving force behind many analysts' bullish calls, as they rely on Apple's loyal user base and competitive product offerings to drive future growth. To be sure, some analysts voiced concerns about ongoing macroeconomic headwinds, a higher-than-justified stock valuation and even that the company may lack adequate innovation in its product designs. The stock fell as much as 2.4% intraday Friday, one day after Apple's September quarter earnings showed a decline in total sales for a fourth straight quarter. Each hardware segment within the company, outside of the iPhone, saw year-over-year declines, with major drops in the iPad and Mac businesses. Still, Apple beat analyst expectations for sales and earnings per share. Shares have jumped about 35% in 2023, outpacing the broader market. Here's what analysts have to say about the outlook for Apple: Morgan Stanley Morgan Stanley remains "guarded" on Apple. Analyst Erik Woodring maintained his overweight rating on the stock and his price target of $210, noting that Thursday's results were still solid in certain categories, but that better clarity on iPhone builds is needed before the firm becomes more outspokenly positive on the stock. "Near term, our focus is on iPhone sell-through, while longer term we believe last night's results strengthen the bull case," Woodring said. The analyst also noted that despite Apple's $6 billion worth of revenue downside in the quarter, the company's record gross margins and cost controls indicate that earnings per share declined by just 2%. Morgan Stanley expects Apple's average revenue per unit to increase once macroeconomic headwinds lessen, saying its overweight rating relies on "iPhone/Services outperformance, structural margin expansion, and a growing [installed base] that will put upward pressure on the [long-term value] of Apple's user base." Goldman Sachs Goldman Sachs reiterated its buy rating on the stock and its 12-month price target of $227, which implies roughly 28% potential upside for Apple. The bank noted that "this was a solid quarter" with gross margin strength driven by strong iPhone results and an acceleration in services revenue. Like Morgan Stanley, Goldman is confident that the iPhone installed base will compound and reach a record in the fourth quarter, partly by expanding into emerging markets and a growing base in other Apple products. Barclays Analyst Tim Long cut his price target by $5 to $161 on continued demand weakness across Apple's hardware categories. Maintaining his equal weight rating on the stock, Long said he continues to see limited upside on either earnings estimates or the stock's price-to-earnings multiple. "We are fine-tuning our revenue estimate for Dec-Q and now model flat revenue Y/Y, with demand continuing to weaken," Long said. Barclays' rating is driven by "headwinds sustaining current demand levels as high end consumers potentially weaken further, tougher comps on Macs/ iPads, regulatory overhang (App Store, Google TAC), lack of differentiation on designs and specs for the current iPhone 15 as well as a rich valuation vs. SPX." JPMorgan JPMorgan kept its overweight rating, but cut its price target by $5 to $225, based on its 2025 earnings estimate. The firm likes Apple's iPhone and Services revenues, tight discipline on operating expenses, its revenue growth catalysts and upside to earnings. These qualities should lead "Apple to deliver to sell-side consensus EPS expectations for F1Q24 despite a softer revenue outlook," according to the firm. Redburn Atlantic Analyst James Cordwell remains confident of Apple's long-term growth, but admitted that revenue has to make a comeback for the stock to continue to outperform. While recent results were slightly "disappointing," the analyst said the quarterly results were an example of how "Apple can grow profits even when topline trends remain lackluster." Redburn Atlantic expects revenue to grow by 1% year-over-year in the December quarter, before accelerating to 4% in the March quarter of 2024 and 7% in the second half of fiscal 2024, resulting in overall revenue growth of 4% for the coming year. Wells Fargo Wells Fargo reiterated its overweight rating on the stock, noting Apple's strong balance sheet and free cash flow generation, as well as its growing recurring paid subscriber base. The firm, which also kept its $225 price target, said it thinks Apple's December quarter results could be "largely uneventful." The upside scenario for the stock, according to Wells Fargo, would require better-than-expected global iPhone growth and market share gains, increased average revenue per user through a higher number of devices per user as well as greater services engagement.