Apple's Analyst Upgrade: Turnaround in Smartphone Cycle Sparks Hope

Itau BBA's Thiago Kapulskis upgraded their rating on Apple (NASDAQ: AAPL) from Sell to Hold on May 3, 2024. The analyst also announced a $188 price target.

In the analyst's report, Kapulskis explained that the upgrade was driven by "a potential turn in the negative smartphone cycle for the first time since 2022, as well as a turn toward less unfavorable sales momentum." This suggests that Kapulskis sees signs of improvement in Apple's smartphone business, which has experienced challenges in recent years.

Apple recently reported its Q2 2024 earnings, which included both positive and negative aspects. The company surpassed expectations in terms of earnings per share (EPS), reporting $1.53 compared to the Zacks Consensus Estimate. However, total revenue of $90.75 billion fell short of expectations for the quarter.

Despite the revenue miss, Apple's gross margin improved sequentially by 70 basis points to 46.6%. The company also returned $27 billion to shareholders, including dividends and share repurchases. Additionally, Apple authorized an additional $110 billion for share repurchases and increased its dividend by 4% to $0.25.

During the earnings call, Apple CEO Tim Cook expressed optimism about the company's performance. Cook highlighted the all-time revenue record in Services and teased an upcoming product announcement and the Worldwide Developers Conference.

Other analysts also provided updates on Apple's rating and price target on May 3, 2024. Rosenblatt's Barton Crockett raised their price target from $189 to $196 and reiterated their Hold rating. Bank of America's Wamsi Mohan raised their price target from $225 to $230 and maintained a Strong Buy rating. Morgan Stanley's Erik Woodring raised their price target from $210 to $216 and also maintained a Strong Buy rating.

Looking at the overall analyst sentiment, 56.3% of top-rated analysts currently rate Apple as a Strong Buy or Buy, while 37.5% see it as a Hold. Only 6.3% either recommend or strongly recommend selling the stock.

The consensus forecast among analysts is that Apple's upcoming year will deliver earnings per share (EPS) of $6.86. If the analysts are correct, this would represent a 6.2% increase on a year-over-year basis.

Since Apple's latest quarterly report on May 2, 2024, the stock price has increased by 6%. Year-over-year, the stock is up 9.5%. However, during that same period, Apple's performance has lagged behind the S&P 500, which has risen by 25.4%.

It is worth noting that Thiago Kapulskis, the analyst who upgraded Apple's rating, is ranked by WallStreetZen in the top 35% out of 4,573 Wall Street analysts. They specialize in the Communication Services and Technology sectors and have an average return of 170% with a 100% win rate.

Apple Inc. is a multinational technology company known for its popular products such as the iPhone, Mac, iPad, and Apple Watch. The company also offers various services including Apple Music, Apple TV+, and Apple Pay. Apple's Q2 2024 earnings report showcased both positive and negative results, leading to mixed reactions from analysts.

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