Apple Shares Rise as Analysts Breathe Sigh of Relief
Summary
Wall Street analysts expressed relief after Apple (AAPL) reported first-quarter earnings that exceeded expectations. Despite a decline in iPhone sales in China, investors were reassured by CEO Tim Cook's explanation that the drop was primarily due to inventory adjustments rather than weaker demand.
Earnings Performance
Apple reported earnings per share (EPS) of $2.40 on revenue of $124.3 billion, beating analysts' forecasts of EPS $2.35 and revenue of $124.1 billion. However, iPhone revenue in China declined 11% year-over-year.
Cook's Explanation
Cook attributed the decline in China to changes in channel inventory, indicating that the company strategically reduced its shipments to suppliers. Despite the decline, he expressed optimism about China sales due to strong demand and the potential for iPhone upgrades driven by Apple Intelligence.
Analyst Commentary
* JPMorgan analyst Samik Chatterjee raised his price target on Apple to $270, citing Cook's commentary and recent Chinese subsidies.
* Citi's Atif Malik maintained his Buy rating, acknowledging that the results were better than feared and noting the positive impact of AI features.
* Raymond James analyst Srini Pajjuri emphasized Apple's strong position in the AI market due to its ecosystem strength, hardware capabilities, and privacy focus.
AI Implications
Apple has been seen as slightly behind its Big Tech peers in AI development. However, it has invested cautiously in AI compared to its "Magnificent Seven" competitors. This prudent approach could prove advantageous as concerns about capex needs and monetization strategies for AI applications emerge.
Stock Performance
Apple shares initially rose 3% in early trading following the earnings report but later reversed direction and ended the day down 0.7%.