On Wednesday, UBS reaffirmed its Neutral stance on Apple Inc. (NASDAQ:AAPL), maintaining the price target at $236.00. The firm's analyst projected that Apple's revenue and earnings per share (EPS) for September would likely meet their expectations of $94 billion and $1.58, respectively. There is potential for a positive surprise, particularly from the iPad segment, which has not been the main focus for investors.
The analyst noted that despite the excitement surrounding artificial intelligence (AI) after Apple's Worldwide Developers Conference (WWDC), iPhone sales for the September quarter appeared to remain steady year over year at approximately 46 million units. This is in contrast to a 2% year-over-year increase in global smartphone sales, as reported by Counterpoint Research. Including an estimated 5 million units for iPhone channel fill during the quarter, the forecast for iPhone units stands at 51 million, with iPhone revenue at $45.7 billion.
These figures are slightly below the Visible Alpha Consensus (VA Cons) of 51.4 million units and expectations of a 4-5 million unit outperformance, following IDC's report suggesting iPhone shipments reached 56 million in Q3.
Looking ahead, the analyst anticipates a cautious outlook from Apple management regarding iPhone demand for the December quarter. This is due to the fact that Apple Intelligence (AI) has not yet been released, with its launch expected on October 28th. The new AI features will be initially available only in "US English," which may limit their immediate impact on demand.
In other recent news, Apple and Goldman Sachs have been fined $89 million by the U.S. Consumer Financial Protection Bureau (CFPB) for violations in their joint credit card venture. The violations involved mishandling of customer transactions and misleading information about interest-free purchases. Goldman Sachs will pay a $45 million penalty and $19.8 million for consumer redress, while Apple will incur a $25 million fine.
Furthermore, Apple has reportedly reduced production of its Vision Pro mixed reality headset due to slow sales, primarily due to high costs and increased competition. The company may halt production of the current model by the end of the year.
Apple CEO Tim Cook recently met with Jin Zhuanglong, China's Minister for Industry and Information Technology, emphasizing the mutual interest in fostering a beneficial relationship for both Apple and the Chinese tech industry. This meeting underscores the importance of the Chinese market for Apple.
InvestingPro Insights
As Apple's Q3 earnings approach, InvestingPro data offers additional context to UBS's analysis. Apple's market capitalization stands at an impressive $3.49 trillion, reflecting its dominant position in the tech industry. The company's P/E ratio of 34.84 suggests investors are willing to pay a premium for Apple's stock, likely due to its strong market position and growth prospects.
InvestingPro Tips highlight Apple's financial strength and market performance. The company has raised its dividend for 12 consecutive years, demonstrating a commitment to shareholder returns. This is particularly noteworthy given the analyst's cautious outlook on iPhone demand for the upcoming quarter. Additionally, Apple's stock is trading near its 52-week high, with a significant 41.67% price return over the past six months, indicating strong investor confidence despite potential headwinds.
While UBS maintains a Neutral stance, it's worth noting that Apple's revenue for the last twelve months reached $385.6 billion, with a gross profit margin of 45.96%. These figures underscore the company's ability to generate substantial profits, which could provide a buffer against potential fluctuations in iPhone sales.
For investors seeking a more comprehensive analysis, InvestingPro offers 16 additional tips on Apple's financial health and market position.
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