Wall Street analysts appeared to breathe a sigh of relief after Apple’s (AAPL) first quarter earnings modestly beat analysts’ forecasts and the company’s explanation of falling iPhone sales in China eased their anxieties.
Apple on Thursday reported earnings per share of $2.40 on revenue of $124.3 billion — higher than the EPS of $2.35 and revenue of $124.1 billion analysts had anticipated, according to Bloomberg consensus estimates. At the same time, Apple’s iPhone revenue in China declined 11% from the prior year, with overall China sales falling more than Wall Street expected.
But Apple CEO Tim Cook had a reason for that: “Over half of the decline that we experienced was driven by change in channel inventory from the beginning to the end of the quarter,” he said in a post-earnings call with analysts. In other words, the company strategically reduced the number of iPhones it shipped to suppliers in Greater China, meaning that, on the whole, the decline in China iPhone sales wasn’t necessarily due to weaker demand.
Actually, he said quite the opposite: “Part of the reason for that is that our sales were a bit higher than we forecasted them to be toward the end of the quarter. And so we ended a little leaner than we had expected to.”
JPMorgan (JPM) analyst Samik Chatterjee raised his price target on Apple to $270 from $260, reiterating his Buy rating and pointing to Cook’s commentary. Chatterjee also noted that recent Chinese subsidies announced in late January could support sales in the region.
Cook also said that Apple Intelligence helped drive a record number of iPhone upgrades, indicating that China sales could get a boost if and when the AI features are approved for rollout by the Chinese government.
Citi’s (C) Atif Malik also maintained his Buy rating on the stock, noting the results were “better than feared.”
“Critically, AAPL comments indicating the initial regions where iPhone AI features have been rolled out are outperforming other geos should support sentiment on the stock,” he added. Apple shares rose as much as 3% in early trading Friday but later reversed direction, ending the day down 0.7%.
Raymond James (RJF) analyst Srini Pajjuri suggested that Apple is better positioned than its “Magnificent Seven” peers to navigate an AI bubble: “We believe Apple is uniquely positioned to offer on-device AI features given its ecosystem strength, hardware capabilities, and privacy focus.”
“On-device AI has lower capex needs and offers faster monetization potential through consumer hardware upgrades, which we think makes AAPL stock particularly attractive as the debate surrounding GenAI monetization/ROI continues.”
