Apple ($AAPL) is poised to deliver a commendable performance in its fiscal third quarter, driven by a notable increase in services revenue despite ongoing challenges. Investors are likely to keep a keen eye on the company's recovery in the Chinese market and any insights related to the anticipated launch of its artificial intelligence-enabled iPhones, according to analysis from BofA Securities released on Monday. The investment firm has projected a revenue of $84.5 billion and earnings per share (EPS) of $1.35 for the June quarter, slightly exceeding consensus estimates which stand at $84.4 billion and $1.34, respectively.
Investors will be awaiting the crucial earnings report scheduled for release after the market closes on Thursday. A significant aspect that investors will focus on is the revenue trajectory within China, especially after the region experienced an 8% year-over-year decline in the second quarter. Analyst Wamsi Mohan from BofA has emphasized that after a strong 14% growth in services revenue in the previous quarter, a similar growth trend is expected to persist into the third and fourth quarters. Attention will also likely be directed toward Apple's September unveiling of the iPhone 16 and its accompanying product line characterized by AI enhancements.
Mohan indicated that stakeholders would be eager to comprehend how these technological advancements may influence monetization on both hardware and services. In terms of unit sales, BofA retained its forecast for iPhone sales in the fiscal fourth quarter at 55 million units, surpassing Wall Street's projection of 50.7 million.
Their revenue predictions for this period stand at $98.6 billion with an EPS of $1.63, again ahead of consensus expectations of $93.6 billion and $1.56, respectively. "We observe a heightened demand coupled with a substantial number of older iPhones in circulation, and the integration of new AI features is likely to stimulate an upgrade cycle," Mohan stated, reinforcing a buy rating for Apple's stock with a price target set at $256.
The reaffirmation of this rating is indicative of the potential advantages bestowed by generative AI, anticipated improvements in gross margin, and positive momentum within the services sector, as highlighted in the report. As BofA looks to the future, it has slightly lowered its fiscal 2024 EPS estimate to $6.68 from previous projections while also adjusting its revenue target to $393.42 billion, down from $393.73 billion.
For fiscal 2025, the EPS now stands at $7.65, revised down from $7.67, with revenue expectations adjusted to $434.87 billion from $435.57 billion. Notably, the firm has increased its 2024 iPhone unit estimate to 227 million units, representing an annual growth rate of 4%, compared to its earlier forecast of 226 million.
However, the target for 2025 has been reduced from 247 million to 241 million units. Additionally, estimates for fiscal 2026 regarding revenue, EPS, and iPhone units have all been elevated. As of now, Apple's stock price stands at $218.11, with a slight change of +0.14, reflecting a percent change of +0.07..