Some of the tech sector’s big 2023 winners continued their ascent this year, but not shares of Apple Inc. Shares of the iPhone maker fell 3% in Monday trading and were down about 10% at the beginning of 2024.
But an analyst at Evercore ISI sees “a series of tailwinds building [Apple’s] favor,” even as the consumer electronics giant lost some of its luster on Wall Street in the wake of a disappointing outlook for the March quarter that implied a decline in revenue.
“While we understand the disappointment around [the March-quarter guidance] we find iPhone units to be largely flat, barring a few [one-time] dynamics,” Evercore’s Amit Daryanani wrote in a note to clients.
Additionally, Apple’s AAPL,
the side story seems well intact. The company “continues to see gross margins working upward” and expects March quarter margins to be between 46% and 47%, while analysts had modeled gross margins of 45.5%. According to Daryanani, this type of talk is “clearly muting the impact of lost revenue on profits” for the March quarter.
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Plus, he’s excited about some Apple developments on the horizon. In his opinion, feedback on the company’s recently launched Vision Pro headphones, which start at $3,499, has been “incrementally better” and interest among companies has been “considerable.”
Apple management has also teased that it will make an announcement on generative AI later this year, which could be another catalyst. Apple has been less outspoken about artificial intelligence than other big tech companies, potentially to the detriment of its stock as Wall Street gets swept up in AI fervor.
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While Daryanani last Friday removed his tactical outperformance call on Apple shares that had been tied to its most recent earnings report, he maintained his regular outperformance rating on the stock and his $220 price target. Among other factors Driving the stock could be Apple’s “sustained” free cash flow generation and a boost to the company’s capital allocation program, he said.
Apple typically updates its buyback and dividend programs along with its March quarter earnings report.
Apple shares fell in Monday’s session, however, after the European Union imposed a nearly $2 billion fine on the company, saying Apple has unfairly shown a preference for its own music streaming service over rival offerings .