Analysts unveil new Apple price targets as China slump clouds earnings

Updated at 8:54 AM EST

Apple  (AAPL) - Get Free Report shares moved lower in early Friday trading after the tech giant posted a better-than-expected December quarter earnings report marred by weak China sales and a muted iPhone revenue forecast.

Apple is facing a series of headwinds in China, which typically accounts for nearly a fifth of its overall revenues, as officials in Beijing move to ban the device for some government officials and state-backed company employees and intense competition from Asia-based rivals eats into its market share.

The group is also seeing fading overall demand for its newly-launched iPhone 15, which underwhelmed Apple enthusiasts last autumn and has failed to capture the consumer zeitgeist of previous upgrades. 

"We've been in China for 30 years and I remain very optimistic about China over the long-term," Apple CEO Tim Cook insisted to investors on a conference call late Thursday. "And I feel good about hitting a new installed base number, a high watermark and very good about the growth in upgraders year-over-year during the quarter."

The December quarter figures, however, were disappointing, with overall China revenues fall 13% to $20.82 billion, a tally that missed Street forecasts by around $3 billion.

Still, global iPhone sales were up 6%, surprising forecasters with a $69.7 billion total that helped overall group revenues rise just over 2% to $119.58 billion. 

In terms of profits, Apple's fiscal first quarter bottom line rose 3.8% to $2.18 per share, with net income of $33.92 billion, with both totals topping analysts' forecasts.

Soft iPhone guidance adds to China concern

The China weakness, however, as well as a muted near-term outlook for both overall revenues and iPhone sales, which are expected to come in at around $50 billion in what would be the worst quarter since the Covid pandemic trough of 2020, are weighing on shares and triggering a host of price target changes from Wall Street.

Piper Sandler analyst Harsh Kumar clipped $10 from his Apple price target, taking it to $215 per share, while cutting fiscal year 2024 revenue and earnings estimates following last night's earnings call and the weak iPhone outlook.

JPMorgan, looking into a year of "depressed earnings growth” for the tech giant, also lowered its rating on Apple by $10, to $225 per share, citing expected weakness in hardware sales beyond the iPhone slump.

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D.A. Davidson analyst Gil Luria, who has one of the lowest price targets on Wall Street at $166 per share, held his 'neutral' rating on Apple in place, but noted that "in order for the company to see meaningful growth in current and new products, it will require them to get unstuck on the product innovation-front."

"Apple has an incredibly compelling opportunity to create new, innovative, generative AI products and applications as generative models get smaller and inferencing moves towards edge devices," Luria said. 

To that point, Cook told investors that generative AI technologies remain a "huge opportunity" for Apple and talked about "a lot of work going on internally" in last night's conference call.

"Our 'MO', if you will, has always been to do work and then talk about work and not to get out in front of ourselves. And so, we're going to hold that to this as well," Cook said. "But we've got some things that we are incredibly excited about that we'll be talking about later this year."

Apple Vision Pro the next 'new thing'

CFRA analyst Angelo Zino, who carries a 'buy' rating on Apple stock with a $210 price target, focused on Apple's broader growth in Asia outside of China, as well as its impressive free cash flow, while picking through the December earnings report.

"We note net cash stands at $65 billion and like enthusiasm surrounding GenAI/Vision Pro," Zino said.

Apple is banking on its new foray into spatial computing category, a sector that includes Meta Platforms  (META) - Get Free Report, with the launch of its $3,500 Vision Pro mixed-reality headset earlier this year. 

Wedbush analyst Dan Ives Apple could sell as many as 600,000 Vision Pro units this year, with volumes, including lower-priced versions, rising past 1 million in 2025.

He held his $250 price target in place after last night's earnings, which is paired with an 'outperform' rating, calling the quarter a "major step in the right direction which was neutralized by a soft March guide."

"Overall numbers for the year go down by roughly 2% and likely are very conservative and set Apple up well for the rest of the year in our view," Ives said. "With now 2.2 billion active devices up from 2 billion a year ago its clear the overall installed base is accelerating and this sets up for the next 12 to 18 months." 

Apple shares were marked 3.4% lower in pre-market trading to indicate an opening bell price of $180.50 each, a move that would nudge the stock into negative territory for the past six months.

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