On Friday, HSBC maintained its Hold rating on Apple Inc. (NASDAQ: NASDAQ:AAPL) shares with a steady price target of $190.00. The tech giant reported a record revenue for its September-ending quarter, achieving a 6.1% growth to $95 billion, slightly surpassing expectations.
iPhone sales, contributing 49% to the group's sales, saw a 5.5% year-over-year increase, while Services revenue reached an all-time high. Despite a nearly flat performance in Greater China, the results marked a break from four consecutive quarters of decline in that region.
The company's gross margin reached $43.9 billion, accounting for 46.2% of sales, which is above the guided range of 45.5-46.5%. However, Apple's earnings per share (EPS) of $0.97 fell short of the anticipated $1.48, affected by a one-time charge of $10.2 billion from the reversal of the European General Court's State Aid decision.
Excluding this charge, the EPS would be $1.64, showing a 12% increase from the previous year. Operating cash flow for the quarter was $26.8 billion, slightly missing the consensus by 2%.
Apple's strategy to incorporate artificial intelligence (AI) was outlined in June, focusing on delivering valuable services with unparalleled privacy through its hardware integration. The company boasts over 2.2 billion active devices, which are expected to gain enhanced functionality from AI advancements.
Following the release of iOS 18, which includes new AI features, upgrades were double those of the previous year's system upgrade within just three days. While the company has acknowledged increased AI investments, specifics on the incremental costs were not detailed during the analyst call on October 31, 2024.
Looking ahead, Apple's guidance for fiscal Q1 2025 indicates revenue growth in the low to mid-single digits, which is below the consensus forecast of 6.8%. The full impact of AI is anticipated to take time, with Apple Intelligence set to become available in Europe in April 2025. Moreover, the company's developer platform, Vision Pro, has not seen an increase in the number of available apps, remaining at over 2,500 native and 1.5 million compatible applications.
HSBC's report concludes with a reaffirmation of the $190 price target, implying a potential downside of approximately 16%. The firm acknowledges the possibility of an upside risk from a quicker-than-expected renewal cycle driven by AI, while also noting the potential downside risks from regulatory decisions that could affect long-term growth. The firm's valuation includes rolling forward its discounted cash flow (DCF) model by one year and introducing its 2027 estimates.
In other recent news, Apple Inc. reported robust earnings and revenue results, with iPhone sales showing a 6% year-over-year increase, surpassing projections. The company's guidance for the upcoming quarter suggests modest sales growth, with estimates of revenues and earnings per share at approximately $123 billion and $2.32 respectively.
Maxim Group adjusted its outlook on Apple Inc., increasing the stock's price target to $215 while maintaining a Hold rating. Meanwhile, Piper Sandler maintained a neutral outlook on Apple with a $225 target, and Citi reaffirmed its Buy rating with a $255.00 price target. DA Davidson also affirmed a Buy rating with a $260.00 target.
In the analyst community, Barclays reduced its price target for Apple, citing anticipated lower iPhone sales for the upcoming quarter and potential challenges in the Chinese market. In contrast, Wedbush Securities emphasized the potential $2 trillion valuation of Apple's services segment, maintaining an Outperform rating.
In regulatory developments, Apple faced a setback in Indonesia due to non-compliance with local content requirements, resulting in a ban on iPhone 16 sales. Federal Reserve Governor Adriana Kugler is set to divest shares of Apple following unauthorized stock purchases made by her spouse, which violated the central bank's ethics rules. These are some of the recent developments surrounding Apple Inc.
InvestingPro Insights
Apple's financial performance remains robust, as evidenced by recent InvestingPro data. The company boasts a substantial market capitalization of $3.42 trillion, underlining its position as a tech industry behemoth. Apple's revenue for the last twelve months as of Q3 2024 stood at an impressive $385.6 billion, with a quarterly revenue growth of 4.87% in Q3 2024, aligning with the article's mention of the company's record revenue and growth.
InvestingPro Tips highlight Apple's financial strength and market position. The company "has raised its dividend for 12 consecutive years" and "operates with a moderate level of debt," which speaks to its financial stability and shareholder-friendly policies. Moreover, Apple is noted as a "prominent player in the Technology Hardware, Storage & Peripherals industry," reinforcing its market leadership as discussed in the article.
However, investors should be aware that Apple is "trading at a high earnings multiple" and "at a high P/E ratio relative to near-term earnings growth." This is reflected in the current P/E ratio of 33.99, which may indicate that the stock is priced at a premium. This valuation metric could be particularly relevant given HSBC's Hold rating and the potential downside implied by their price target.
For readers interested in a more comprehensive analysis, InvestingPro offers 13 additional tips that could provide further insights into Apple'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.