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Apple (NASDAQ:AAPL) could return to outperformance in 2024 after surpassing the $3 trillion mark this year, Citi said.
The bank, which maintains a Buy rating with a $230 price target, gave three reasons why the stock could rebound next year:
- Service revenue growth
- iPhone demand
- ai Phone and Vision Pro
The Services business remains the bright spot with Sensor Tower data showing App Store revenue growth of +11% each in October and November. A recent Citi survey also indicates that the growth of digital advertising budgets will accelerate in 2024.
iPhone demand trends remain a debate amid concerns around the strength of the macroeconomic environment and potential loss of share in China amid Huawei's resurgence. Citi notes that Apple's (AAPL) iPhone supplier Hon Hai Precision Industry (OTCPK:HNHAF) (OTCPK:HNHPF) has revised up its fourth-quarter outlook to be better than original forecasts for “significant growth.” .
ai Phone and Vision Pro are upside catalysts as Apple (AAPL) is better positioned to take advantage of ai adoption in smartphones with its superior shared memory architecture.
Apple (AAPL) is already up 50% so far this year compared to 20% for the S&P 500.
“Equity bears are missing the story of structural gross margin expansion driven by iPhone premiumization, accelerating service sales, and the benefit of silicon onboarding/favorable commodity prices that drove the rally.” P/E multiple expansion this year,” wrote analysts Atif Malik and Asiya Merchant. in a note.
“We expect previous trends to continue next year.”
Solid sales
Separately, KeyBanc said its November carrier survey reveals strong iPhone 15 sales over Thanksgiving, in line with slightly better than store expectations and improving from the weaker October.
Overall, our data tells us we should expect below-average growth for the fiscal first quarter.
“While October benefited from iPhone synchronization, we think November would have been better if Mac synchronization had been pushed into November and Black Friday shopping,” analysts led by John Vinh wrote in a note.
“We view our November carrier survey and Key First Look Data results as slightly positive for Apple's supply chain (AVGO, CRUS, QCOM, QRVO and SWKS).”
KeyBanc maintained a Sector Weight rating on Apple (AAPL).
