Proactive Investors - Apple Inc (NASDAQ:AAPL, ETR:APC)'s conservative revenue guidance for the December quarter is an opportunity for a modest beat, analysts at Bank of America (NYSE:BAC) believe.
The iPhone maker’s guidance suggests sales will grow by the low to mid-single digits during the holiday quarter, short of the 7% growth expected by Wall Street analysts.
“Despite very modest topline negative revisions, earnings are not likely to change much given the upside in gross margins, which we expect will sustain in F25 and beyond,” they wrote in a note to clients.
“The March quarter should continue to have strong gross margin on higher mix of Services.”
While they noted it was too early to determine the trajectory of the iPhone 16 cycle, they believe the staggered launch of Apple Intelligence creates a product refresh cycle different from the past with new features incrementally available to the installed base over time.
“With iPhones likely flat to modestly up into December, we expect iPhone growth to improve through F25 and beyond,” they wrote.
“The halo effect around Apple Intelligence in Macs, and iPads will also likely be a benefit later in F25.”
They also see tailwinds ahead for Apple’s Services segment.
Services revenue was a record $25 billion in the September quarter, up 12% year-over-year but marginally below the consensus.
The December quarter guidance of 13% year-over-year growth is roughly in line with the Street.
“We see tailwinds to Services growth given the opportunities of further penetration of existing services in the installed base and from incremental opportunities from new services,” analysts wrote.
“Services gross margins was 74% or flat quarter-over-quarter and plus 310 basis points year-over-year. We see incremental opportunities for margins to be structurally higher as well.”
The bank’s analysts repeated their ‘Buy’ rating and $256 price objective, pointing to the multi-year iPhone cycle, upside to gross margins and strong cash flows.
Apple shares (NASDAQ:AAPL) traded down 1.8% at about $221 in the early afternoon on Friday.