Apple's Q3 Earnings Preview: AI Potential and Market Expectations
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On Thu, 25 Jul, 12:04 AM UTC
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Apple Q3 Earnings Preview: Will AI Elevate iPhone Maker's Stock? - Apple (NASDAQ:AAPL)
Analyst sees Apple positioned for revenue growth in FY25, with AI replacing iPhone sales as a key catalyst for stock upside. As Apple Inc AAPL gears up for its Q3 2024 earnings report, all eyes are on Cupertino, California. According to JPMorgan analyst Samik Chatterjee, Apple is not just coasting on its past success but gearing up for a thrilling AI-driven future that could propel its stock to new heights. Chatterjee has placed Apple on a 'Positive Catalyst Watch,' raising the price target to $265 by December 2025, up from the previous $245 for December 2024. So, what's behind this optimistic outlook? Let's dive into the details. AI is Apple's Next Ace According to Chatterjee, Apple is in a strong position to leverage this upcoming AI cycle, particularly through its iPhone and overall revenue performance. "We expect Apple to reassure investors that the upcoming AI replacement cycle earmarked to begin in earnest in FY25 (Sep-end), and step-up further into FY26, is leveraging a more robust launchpad in FY24 with better than expected revenue drivers," says Chatterjee. He expects a revenue beat for both iPhone sales and the company's total revenue, which could ease investor concerns about Apple's premium valuation multiple. For the third quarter, Chatterjee anticipates Apple's revenue to reach $85.3 billion, slightly above the consensus of $84.3 billion. Earnings per share are expected to be $1.38, compared to the consensus of $1.34. iPhone To Be Key Apple Earnings' Driver Notably, the iPhone is projected to be a key driver of this performance, with estimated sales of approximately 44 million units, leading to $39.9 billion in revenue, surpassing the consensus of $38.9 billion. Strong performance in China and other key regions is expected to contribute significantly to these numbers. Looking ahead to the fourth quarter, Chatterjee forecasts revenue of $95.5 billion and earnings per share of $1.62, both ahead of the consensus estimates. This projection marks the second consecutive quarter of year-over-year revenue growth, following a decline earlier this year. The iPhone, Services, and Mac segments are expected to lead the charge, while the Wearables, Home, and Accessories segment might experience some decline. Read Also: Magnificent 7 Still Comprise Over 30% Of S&P 500 Despite Tech Correction Apple's AI Cycle: Underestimated or Overlooked? While Apple's stock has rallied in recent months, Chatterjee sees room for further upside. He believes that the AI cycle presents untapped opportunities, particularly in improving margins, increasing iPhone volumes, and potentially extending the replacement cycle beyond FY26. Chatterjee believes there is untapped potential within Apple's AI strategy. He outlines three key areas that investors might be underestimating: Margin Boost: The preference for premium iPhones among early adopters has historically led to impressive gross margin improvements, and this trend could continue despite investor concerns about component costs. Volume Expansion: The AI-driven upgrade cycle is not confined to North America. Apple's reach could extend globally, driving volumes beyond expectations and marking a departure from the patterns seen in the 5G cycle. Prolonged Growth: With leading-edge AI features slated for iPhones post-FY26, Apple might witness an extended period of growth, possibly outstripping current expectations. As Chatterjee states, "Our Dec-2025 price target of $265 only assumes a 26x earnings multiple on CY26 estimates as they already embed the tailwinds of the AI replacement cycle." With these factors in play, Apple's upcoming earnings release could be the spark needed to propel its stock to new heights. Read Next: Elon Musk Agrees With Mark Zuckerberg On Apple, Tesla CEO Wonders How Many Enemies He Can Make And Survive Market News and Data brought to you by Benzinga APIs
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Apple expected to beat Q3 estimates ahead of upcoming AI cycle: JP Morgan
Apple (NASDAQ:AAPL) has garnered interests surrounding its upcoming release of artificial intelligence-powered devices. However, J.P. Morgan believes next week's Q3 earnings results will beat estimates and provide a catalyst ahead of Apple's AI cycle. "Specifically, we expect Apple to reassure investors that the upcoming AI replacement cycle earmarked to begin in earnest in FY25 (Sep-end), and step-up further into FY26, is leveraging a more robust launchpad in FY24 with better than expected revenue drivers in iPhone as well as for the company in aggregate, with our expectations for a beat now on both fronts," said J.P. Morgan analysts led by Samik Chatterjee, in an investor note on Wednesday. As a result, J.P. Morgan increased it price target on Apple to $265 from $245. The firm also placed Apple on its "Positive Catalyst Watch." "The revenue upside, in turn, drives our expectations for EPS upside, which is likely to lead to consensus revisions for full-year earnings, and partly ease investor concerns around a premium valuation multiple," Chatterjee added. J.P. Morgan also expects upward revisions to iPhone 16 volumes following its launch, which is expected in September. The advancement in Edge AI capabilities could also spur a longer and stronger replacement cycle than seen in years past. J.P. Morgan increased its estimates on Apple's Q3 fiscal 2024 results to revenue of $85.3B from $83.8B. It also upped its expected earnings per share to $1.38 from $1.34. Apple is slated to release its Q3 fiscal 2024 results one week from tomorrow, on Aug. 1. A consensus of analysts calls for earnings per share of $1.33 on revenue of $84.08B. Apple was down 2.7% by mid-morning trading on Wednesday. More on Apple Apple Q3 Preview: Bears, Get Ready For Another iPhone Lesson Apple Buybacks, AI Are Just For Optics Apple Stock Is More Expensive Than Nvidia Apple's App Store conduct under probe by Spain's antitrust agency Apple in focus as Barclays ups estimates on improving iPhone, Mac, services
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Apple is set to report its Q3 earnings, with analysts focusing on the company's AI potential and its impact on future growth. The market anticipates strong results despite challenges in the smartphone market.
Apple's Q3 Earnings Anticipation
As Apple prepares to release its third-quarter earnings report, investors and analysts are keenly watching for signs of the tech giant's future trajectory. The company's performance comes under scrutiny amidst a challenging smartphone market and growing interest in artificial intelligence (AI) capabilities 1.
Market Expectations and Analyst Predictions
Despite concerns about the broader smartphone market, analysts remain optimistic about Apple's Q3 results. Wedbush analyst Dan Ives predicts that Apple will surpass Wall Street's expectations, projecting earnings per share of $1.20 compared to the consensus estimate of $1.19 2. This positive outlook is supported by strong iPhone sales and growth in Apple's services segment.
AI Potential and Stock Performance
The potential for AI integration in Apple's ecosystem has become a focal point for investors. Ives suggests that the company's AI strategy could be a significant catalyst for the stock, potentially driving it towards a $3 trillion market cap [1]. The anticipation surrounding Apple's AI developments has contributed to a 46% year-to-date increase in the company's stock price.
Services Segment Growth
Apple's services business continues to be a bright spot, with expectations of 11% year-over-year growth. This segment, which includes offerings like Apple Music and iCloud, is seen as a key driver of the company's future success [2]. The robust performance of services is expected to offset any potential weakness in hardware sales.
Challenges in the Smartphone Market
While Apple is projected to outperform, the overall smartphone market faces headwinds. Global smartphone shipments declined by 12% year-over-year in Q1 2023, marking the lowest Q1 shipments since 2014 [1]. However, Apple's premium positioning and brand loyalty have allowed it to navigate these challenges more effectively than some competitors.
Looking Ahead: The AI Cycle
Investors are increasingly focused on Apple's long-term AI strategy. The company is expected to unveil new AI features for the iPhone later this year, potentially setting the stage for a new "AI cycle" that could drive growth and innovation [2]. This anticipation has led to increased bullish sentiment among analysts, with some setting price targets as high as $240 per share.
Apple's Q3 Earnings: AI Integration, iPhone Sales, and Growth Potential in Focus
Apple is set to release its Q3 earnings report, with investors and analysts closely watching for signs of growth, AI integration, and performance in key markets. The tech giant faces challenges and opportunities in a rapidly evolving tech landscape.
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Apple Stock Soars: Analysts Bullish on Tech Giant's Future
Apple's stock is gaining attention as analysts predict a strong performance in the coming months. With a bull market on the horizon and positive forecasts from Morgan Stanley, investors are eyeing Apple as a potentially lucrative investment.
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Apple's Q3 2024 Earnings: AI Ambitions Amidst China Challenges
Apple reports better-than-expected Q3 2024 earnings, showcasing resilience in a challenging market. The tech giant emphasizes AI initiatives while grappling with declining sales in China.
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Apple's Q3 Earnings Approach: iPhone 16 Anticipation and AI Prospects
As Apple's Q3 earnings report nears, analysts focus on iPhone sales, potential AI developments, and the company's stock performance. Bernstein maintains a $240 price target, while investors eye the upcoming iPhone 16 release.
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Apple's AI Ambitions and Potential $4 Trillion Valuation: Analysts Weigh In
Apple's stock is gaining attention as analysts predict a historic upgrade cycle and AI integration, potentially pushing the company's valuation past $4 trillion. The tech giant's AI strategy and its impact on future products are under scrutiny.
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