Barclays analysts have raised their estimates for Apple (NASDAQ:AAPL), primarily due to a more favorable outlook for the September quarter.
The bank highlighted a slight increase in iPhone builds, projecting 52 million iPhone unit shipments, which is above the Street consensus of 49 million units.
"Overall, we see better than expected Sep-Q guidance led by iPhones, continued strong Services growth and better MacBook (back to school) revenue, offsetting softer Wearables," the analysts said in a note.
They stressed that "the Sep-Q guidance is the main event as investors care less about June-Q results due to the tail end of the IP15 cycle, but ultimately the reception of the iPhone 16 and AI features will dictate performance."
Analysts also lifted their price target on Apple stock, but only slightly from $164 to $187. The new target still implies a notable downside risk of around 15% from current levels.
“We do not think the iPhone16/AI features will be enough to drive a meaningful enough upgrade cycle to justify the valuation,” they noted.
For the imminent June quarter, Barclays expects in-line results as better Services growth and MacBook revenue (due to easy comparisons) offset weaker Wearables. They anticipate iPhone shipments of 43 million units and iPad results to be in line with expectations.
Regarding capital expenditures (capex), Barclays estimates $2 billion for the June quarter, largely flat compared to the previous quarter. They believe that higher capex is needed to validate Apple's ability to differentiate on AI services. While AAPL’s capex spend is expected to rise eventually due to investments in internal ASIC for AI servers, the ramp might be slow.
Barclays also pointed out that "near term AI features on phones are being capped due to limitations on language availability and 3rd party app Apple Intelligence API adoption.”
“EU DMA rule and China AI restriction are preventing AAPL from adopting AI features in these two regions for the time being,” analysts added.