Apple’s Conservative Guidance Fuels Analyst Debate on iPhone Sales
Apple (AAPL.US) reported its fourth-quarter earnings, sparking a mixed reaction from analysts regardingthe company’s performance and future outlook. While Morgan Stanley maintained its Overweight rating and $273 price target, citing improved gross margins and serviceacceleration, the firm also acknowledged a potential production cut in the December quarter, leaving analysts divided.
Leading analyst Erik Woodring believes the stock price may experience short-term volatilitybut sees limited downside potential. He highlights the consumer response to Apple Intelligence, the company’s initial foray into AI, as a crucial driver for December quarter performance.
Analysts acknowledge a mixed outlook for the first quarter of fiscal 2025, with revenue slightly below Morgan Stanley/buy-side expectations but gross margins exceeding consensus. This, they argue, reflects a projected 3-4 million unit reduction in iPhone production, confirming their predictions while still expecting iPhone revenue to remain flatin the quarter.
With production cuts already factored in (and Wall Street estimates reflecting this), the potential downside for the upcoming iPhone 17 series, slated for release next year, may be limited. Analysts are hopeful for an early launch of the iPhone 17.
The results were indeed mixed – September quarter revenuecame in below our expectations, but above consensus estimates, stated Woodring and his team in a report. They attribute this primarily to lower iPhone average selling prices and slightly weaker service performance.
However, analysts point out that this still represents a sequential improvement from the first two quarters of September, reflecting the strong performance of theiPhone 15 in the latter part of the quarter.
Meanwhile, Seeking Alpha analyst Uttam Dey holds a positive view of the earnings. Dey comments, Apple’s Q4 results were solid, beating expectations, with iPhone sales up 6% year-over-year, indicating continued growth in its smartphonedemand.
He highlights the stark contrast between Apple’s fourth-quarter performance and Samsung Electronics’ third-quarter results earlier this week, which revealed the Korean smartphone manufacturer’s loss of early momentum in the AI smartphone space.
Dey adds that Apple’s results also serve as an early indication of the iPhone16’s potential popularity in the smartphone market, suggesting that the iPhone 16 we’ve all been waiting for may be a hit.
This mixed outlook on Apple’s performance and future prospects, particularly concerning iPhone sales, underscores the ongoing debate among analysts. While some see continued growth driven byAI integration and strong consumer demand, others are cautious about potential production cuts and the impact of economic uncertainty. The upcoming release of the iPhone 17 series will be a crucial indicator of Apple’s ability to maintain its market dominance in the increasingly competitive smartphone landscape.
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