On Thursday, Barclays reiterated its underweight rating on Apple shares (NASDAQ:AAPL), maintaining the $164.00 price target. The firm's stance comes with expectations of hardware revenue aligning with forecasts for the June quarter and projections of improved iPhone builds in the September quarter.
Apple's App Store saw a 13% year-over-year growth for the June quarter, suggesting potential overperformance compared to Wall Street's service revenue estimates for the same period.
The analyst from Barclays expressed concerns about the upcoming iPhone 15, citing anticipated demand weakness and longer replacement cycles as factors that could dampen the product cycle's success.
Moreover, macroeconomic challenges and difficult year-over-year comparisons are expected to impact Apple's performance. The ongoing Google/Department of Justice trial poses a risk to Apple's traffic acquisition costs (TAC), which account for 10% of the company's earnings per share, with a verdict anticipated by the end of the year.
Barclays' analysis suggests that the discrepancy between Apple's fundamentals and its market valuation has become overly pronounced. The firm anticipates that this could lead to a relative correction in 2024. Moreover, if the iPhone 16 fails to introduce significant innovations, Barclays expects Apple's stock performance to continue on a steady, unchanged trajectory.
The firm's outlook is cautious regarding Apple's short-term prospects, with a keen eye on the potential implications of the Google/Department of Justice trial outcome. Amid these considerations, Barclays holds firm on its current rating and price target for Apple stock, which trades on the NASDAQ under the ticker AAPL.
In other recent news, Apple Inc. has agreed to open its near-field communication (NFC) technology to competitors, following a settlement with the European Commission. This move is set to boost third-party mobile wallet developers' access to NFC payments for European Economic Area iOS users.
Meanwhile, Taiwan Semiconductor Manufacturing Co (TSMC) has joined the trillion-dollar club, driven by a surge in demand for artificial intelligence (AI) chips. Analysts from Grasshopper Asset Management have expressed a positive outlook on TSMC's prospects, citing AI-related demand and potential pricing powers.
Apple Inc. has also led the personal computer industry with a 20.8% surge in global shipments in the second quarter. This growth is attributed to the increasing demand for AI-capable devices. However, KeyBanc Capital Markets has maintained a cautious stance on Apple's near-term growth prospects, citing low upgrade rates and high current stock valuation.
Epic Games, the creator of "Fortnite," has accused Apple of hindering the launch of its game store on iOS devices in Europe. The video-game publisher claims that Apple's rejections of its app submissions are arbitrary and potentially in breach of the Digital Markets Act. These recent developments highlight the dynamic and evolving landscape of the technology sector.
InvestingPro Insights
As Apple navigates through the challenges outlined by Barclays, real-time metrics from InvestingPro shed light on the company's financial health and market position. With a robust market capitalization of $3490.0 billion, Apple stands as a financial behemoth.
Still, the company's high P/E ratio of 35.22 indicates that its stock may be trading at a premium, which aligns with Barclays' concerns over valuation discrepancies. This is further evidenced by Apple's PEG ratio of 3.82, suggesting that the stock's price may be high relative to its earnings growth potential.
Despite a slight decline in revenue growth over the last twelve months, with a -0.9% change, Apple's gross profit margin remains strong at 45.59%, showcasing the company's ability to maintain profitability. Additionally, Apple has demonstrated a consistent commitment to shareholder returns, having raised its dividend for 12 consecutive years, and with a dividend growth of 8.7% in the last twelve months.
InvestingPro Tips highlight that Apple is a prominent player in its industry and operates with a moderate level of debt, ensuring financial stability. For investors looking to delve deeper into Apple's performance metrics and gain further insights, InvestingPro offers additional tips that can be explored.
Use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and discover the full range of InvestingPro Tips at https://www.investing.com/pro/AAPL. With 19 additional tips available, investors can make informed decisions backed by comprehensive data analysis.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.