Consumer Electronics

Apple Could Hit $200 After Tough Run

Douglas A. McIntyre

Published: December 27, 2023 7:50 am

After a surge that took Apple Inc. (NASDAQ: AAPL) shares up more than 50% in a year, the stock has traded less than flat in the past month while the market has risen. If Apple participated even modestly in a strong holiday sales season, its shares, at slightly above $190, should jump above $200 again.

Some analysts think $200 is a low-side number. According to bullish analysts, Apple stock could hit $240 a share. Tip Ranks shows that 33 analysts have posted ratings on Apple in the past three months.

Some investors are anxious about Apple. Its most recent earnings were not spectacular. In that quarter, revenue dropped 1% to $89.5 billion. Earnings were up 13% to $1.46 per share.

There is also the headwind of trouble with Apple Watch sales. A patent dispute has blocked Watch Series 9 and Ultra 2 imports to the United States. It is too early to tell if that block will last more than a few days. (Customers are abandoning these 25 brands.)

It is important to remember the iPhone has been the engine of Apple’s financial results. iPhone sales revenue barely rose in the quarter, from $42.6 billion in 2022 to $43.8 billion. Additionally, China is one of Apple’s largest iPhone markets and the world’s largest smartphone market. For the quarter, revenue from China was $15.1 billion, down from $15.5 billion a year ago.

However, the iPhone 15 is part of Apple’s usual cadence of introducing a new model once a year, typically in September. With each new generation comes the concern that it is not enough of an upgrade in features compared to the prior version. Nevertheless, this holiday, consumers may have repeated a cycle that goes back more than a decade by upgrading their iPhones before the end of the year.

iPhone 15 sales are off to a slow start in China. Part of the reason is that local smartphone companies do well. The largest of these are Vivo, Oppo and Huawei. Apple does not have similar competition in any other market. However, Apple has dismissed this as a problem.

Apple’s services division continues to grow. Revenue rose to $22.3 billion last quarter from $19.2 billion in the same period a year ago. This part of Apple includes iCloud, Music, Fitness+, Pay, Apple Card and Apple TV+. According to TechCrunch, Apple has about a billion service subscribers.

Much of the debate about Apple is about whether its services revenue can be a new engine for overall revenue. As of now, the answer is yes. That is good news for Apple stock.