Apple Inc. (NASDAQ:AAPL) is on track to beat third-quarter earnings expectations, driven by strong performance in its iPad, Mac and Services segments. Goldman Sachs analyst Michael Ng forecast EPS of $1.36 on revenue of $85.1 billion, as Apple releases its report on August 1.
Ng’s optimism was fueled by expected strong performance in Apple’s iPad and Mac segments, which are expected to see double-digit growth, alongside a solid 15% increase in services revenue.
Ng attributed the higher-than-expected EPS to Apple’s innovative product lineup and strategic pricing. Ng said, “We expect AAPL to deliver higher EPS in Q3 2024E with revenue of $85.1 billion (+4% YoY) and EPS of $1.36.”
It forecasts iPhone revenue of $37.8 billion, despite a 5% year-over-year decline due to price-cutting efforts to maintain clean channel inventory.
The analyst pointed to Apple’s advancements in AI as a catalyst for future growth, particularly in driving iPhone upgrades.
“Apple’s AI may drive iPhone shipments as customers look to upgrade to hardware that supports new generative AI features,” Ng said. That technological advantage, combined with larger displays for the iPhone 16 Pro and Pro Max models and thinner devices for the iPhone 17, is expected to push iPhone shipments to 230 million to 256 million units between 2024 and 2026.
Ng also highlighted Apple’s success in creating a seamless ecosystem that encourages multiple device ownership per user. He said, “The number of Apple devices per iPhone user has increased, with Macs and iPads also benefiting from AI.” This strategy should support revenue growth, especially with the recent launches of MacBook Air models and new iPads.
Despite the challenges in the broader PC and tablet markets, Ng remains confident in Apple’s ability to weather those challenges. He sees Apple’s services segment as a key potential driver of future profitability, driven by price increases and continued strong App Store spending.
“The majority of gross profit growth over the next five years is expected to be driven by services,” Ng said, emphasizing the sustainability and visibility of Apple’s revenue streams.
Ng’s price target for Apple is $265, which represents a 15.8% upside from its current price of $228.88. He maintained a bullish rating on the stock, highlighting the strength of Apple’s ecosystem and its potential for sustainable growth.
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