Is Apple Stock Going to $225? 1 Wall Street Analyst Thinks So

The market warmed to Apple's (NASDAQ: AAPL) recent fiscal second-quarter earnings report, as did an analyst at J.P. Morgan, a heavyweight financial company. The analyst raised the price target from $210 to $225 per share while maintaining an "overweight" rating.

Better than expected earnings from Apple

The upgrade follows a good set of results from the company that allayed fears over lagging iPhone sales, particularly in China. That might sound surprising in light of the fact that iPhone sales did decline 10.4% year over year in the quarter to $45.96 billion.

However, as management noted on the earnings call, last year's fiscal second-quarter iPhone revenue was boosted by a "one-time impact" that added $5 billion to its sales, as it filled pent-up demand resulting from pandemic-related supply chain disruptions. Apple CEO Tim Cook said, "Our March quarter total company revenue this year would have grown," excluding this impact.

Apple is on a good track for 2024

The analyst also noted that the guidance for the fiscal third quarter demonstrates the strength of the iPhone franchise and sets the company up nicely for the rest of 2024. It's hard to disagree. Management guided toward total revenue growth in the low single-digit range while expecting a 2.5% headwind from unfavorable foreign exchange movements – guidance implies as much as 5.5% organic growth.

In addition, after a 14% year-over-year increase in revenue from its high-margin services segment in the fiscal second quarter, management expects another quarter of double-digit growth. Sales gains in services continue to transform Apple's margin profile, as gross profit margins there come in near 75%, compared to 36.6% for products. Services made up just over a quarter of Apple's overall revenue, compared to 22% in the same quarter last year. Apple's overall gross margins improved to 46.6% from 44.3%.

A happy investor.

Image source: Getty Images.

A stock to buy

Apple is in a prime position to reap the benefits of incorporating artificial intelligence into its iPhones due to its impressive sales figures and sustained growth in services revenue.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and JPMorgan Chase. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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