Apple's Positive Catalyst Watch: Analyst Expects Boost in Q4 iPhone and Services Sales

Citigroup's Atif Malik reiterated their Strong Buy rating on Apple (NASDAQ: AAPL). The analyst also maintained a $240 price target.

In a post-print review of Apple's Q3 2023 earnings report, Malik expressed optimism about the company's future prospects. They opened a "90-day positive catalyst watch" on Apple, with their focus on the highly anticipated iPhone 15 release in September 2023.

Malik highlighted Apple's track record of outperforming the market following Q3 prints and new iPhone announcements. Since 2016, Apple shares have outperformed the Nasdaq in 5 out of 7 instances and the S&P 500 in all 7 instances, with an average outperformance of 8%.

The analyst believes that Apple's focus on maximizing gross profit over sales volume, especially when customers migrate to premium phones and related services, will continue to drive growth. Malik stated, "Given the likelihood of a boost in both Q4 iPhone and services sales relative to last year, Apple should again prove its focus remains on maximizing gross profit over sales volume when customers migrate to premium phones and related services."

For Q3 2023, Apple reported earnings per share (EPS) of $1.26, beating the Zacks Consensus Estimate of $1.19 and showing a 5% increase compared to Q3 2022. The company's revenue for the quarter was $81.8 billion, roughly in line with the Zacks Consensus Estimate, but slightly lower than Q3 2022 by 1%. Apple's gross margin for Q3 was $36.41 billion.

Looking ahead to Q4 2023, Apple's management guided for a revenue performance similar to Q3. They expect a gross margin of 44% to 45% and operating expenses (Opex) of $13.5 billion to $13.7 billion.

CEO Tim Cook highlighted Apple's achievements in Q3, including an all-time revenue record in Services driven by over 1 billion paid subscriptions. Cook also mentioned the company's continued strength in emerging markets, thanks to robust sales of the iPhone. He emphasized Apple's commitment to advancing their values and championing innovation that benefits customers and the environment.

In addition to Citigroup's Atif Malik, other analysts also updated their ratings on Apple on August 4, 2023:

- Barclays' Tim Long raised their price target by 12.1% to $149 and maintained their Hold rating on the stock. - Morgan Stanley's Erik Woodring lowered their price target by -2.3% to $220 and maintained their Strong Buy rating on the stock. - Raymond James' Srini Pajjuri raised their price target by 11.1% to $180 and maintained their Buy rating on the stock.

According to data from WallStreetZen, 75% of top-rated analysts currently rate AAPL as a Strong Buy or Buy, while 20.8% see it as a Hold. Only 4.2% of analysts 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 $6.32. If the analysts are correct, AAPL's next yearly EPS will be up by 5.7% on a year-over-year basis.

Since Apple's latest quarterly report on August 3, 2023, the stock price has declined by 4.8%. However, on a year-over-year basis, the stock has gained 9.8%, outpacing the S&P 500's growth of 7.9%.

Citigroup analyst Atif Malik is ranked in the top 1% out of 4,288 Wall Street analysts, according to WallStreetZen. With an average return of 26.5% and a win rate of 68.3%, Malik specializes in the Financial Services, Technology, and Industrials sectors.

Apple Inc. is a global technology company known for designing, manufacturing, and marketing various products and services. Their product lineup includes smartphones (iPhone), personal computers (Mac), tablets (iPad), wearables (AirPods Max), and accessories. Apple also offers services such as AppleCare support, cloud services, and digital content distribution through platforms like the App Store. The company serves consumers, small and mid-sized businesses, as well as the education, enterprise, and government markets. Apple's commitment to innovation and sustainability is evident in their efforts to advance their values and make a positive impact on the world.

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