In recent weeks, Apple (NASDAQ:AAPL) stock has faced challenges, which has yielded a 2% year-to-date underperformance compared to the S&P500's 0.2% decline. Concerns surrounding China demand, watch bans, and regulatory risks have contributed to this dip.
Despite these worries, Evercore ISI analysts suggest that Apple is poised to report positive results for the December quarter and guide March expectations in line with street forecasts.
“We maintain our bullish stance on Apple and think buyside expectations are likely below current consensus, so an in-line quarter would likely drive upside, especially if Apple can point to continued solid iPhone performance in China,” the analysts wrote in a note.
Apple stock rose 1% in pre-market on the news.
Gross margins are identified as a potential wildcard in the March quarter, with the historical pattern of flat to slightly down margins.
While China remains a focal point for investors, emerging market share gains and increased average selling prices in developed markets are anticipated to stabilize iPhone revenue.
Services, another area of concern, is expected to sustain high single to low double-digit growth, fueled by Google payment upticks and continued double-digit growth in the App Store. Evercore ISI downplays the impact of an anti-trust inquiry, suggesting Apple may not address it in the earnings call.
“We see minimal impact from the Watch ban as the actual ban was only in effect for less than a week and likely did not have a meaningful impact on sales,” the analysts added.
Potential upside catalysts include insights into the Vision Pro market and production volumes, along with the prospect of sustained record-high gross margins, driven by a robust services mix and strength in high-margin Google payments.
Apple stock is rated as Outperform at Evercore ISI with a price target of $220 per share.
Yesterday, Bank of America analysts raised their rating on Apple stock to Buy, citing potential upside from AI and Vision Pro.