Investing.com -- Evercore ISI added Apple Inc (NASDAQ:AAPL) stock to its Tactical Outperform List, highlighting the company's potential to deliver a quarter in line with expectations, bolstered by growth in emerging markets and strong performances in its Services and Wearables divisions.
Evercore analysts expect that the March quarter could see an extended and robust iPhone cycle, potentially outpacing typical seasonal trends. However, they note that China remains “a key wildcard” in this outlook.
Concerns about industry data are pointing to potential iPhone weakness, which could help temper expectations and position the stock to perform even with softer-than-anticipated guidance.
While acknowledging incremental discounting in China for the iPhone 16, Evercore believes overall demand "should remain stable specially given emerging market tailwinds that are starting to account for a larger % of iPhone units."
Regarding China, the investment bank says that the flat year-over-year revenue reported for September 2024 was a reassuring sign, bolstering their confidence in Apple’s ability to sustain its iPhone market share despite heightened competition from Huawei.
They also point out reports indicating that Huawei is facing challenges in sourcing sufficient chips for its smartphones, a dynamic that could benefit Apple.
Gross margins are expected to align with the December-quarter guidance range of 66-67%, with Evercore anticipating similar guidance for March 2025.
“We also think investors will begin to shift focus to the iPhone 17 and it will reportedly unveil a new form factor, which could be a positive for the stock,” analysts added.
Additionally, Apple is expected to launch a new SE model in March, which could potentially boost estimates for the June quarter.
In sum, Evercore remains bullish on Apple stock heading into its next print, noting that the Services division should remain robust and iPhone sales will likely “continue to improve as we move through the fiscal year. “
“Shifting of investor focus to the iPhone 17 and SE plus another better than feared China quarter should also add some incremental positivity to the narrative around iPhone,” analysts added.