Evercore ISI Keeps Outperform on Apple, $380 Price Target

Evercore ISI analyst Amit Daryanani reiterated an Outperform rating and $380 price target on Apple (NASDAQ: AAPL).

“AAPL’s Sept-qtr print reinforced our view that underlying hardware demand remains healthy (despite price increase), but the debate is increasingly shifting toward margins & EPS power as memory costs rise, Services growth moderates and Siri AI costs start to flow into the model.

Structurally, we expect AAPL to navigate a choppy GM environment till we start to see memory pricing stabilize (or come down) and/or Siri AI unlocks incremental monetization.

AAPL reported a solid Sep-qtr beat with revs/EPS of $114.5B/$2.10 vs. Street at $113.4B/$1.99, although EPS included a 5c tariff refund benefit.

Revenues grew ~12% y/y, with upside from iPhone (+17.5%) and Mac (+23.7% y/y).

For Dec-qtr, AAPL guided sales +7-10% despite constrained supply, with GMs of 45-46%, below investor expectations (implying EPS of ~$2.90).

FOUR key points: 1) Feeling the Memory Impact: The 45.5% GM midpoint implies ~140bps q/q compression ex-Sept-qtr tariff refunds, primarily from memory but also from mix + Siri AI costs.

AAPL expects memory costs to rise beyond December as inventory benefits fade.

2) Supply Constraints Shift: Advanced-node constraints are easing with the transition to 2nm, while memory availability limits Mac/iPad into Dec.

Duo remains constrained with no timeline for supply/demand balance. Manufacturing purchase obligations also rose $33B q/q.

3) Services Slowdown: Dec-qtr growth of +8-9% reflects licensing headwinds + another ~50bps sequential FX drag, with gaming weakness persisting.

Question here is how structural these issues are and how long they persist.

4) AI Has Near-Term Costs: Siri AI cloud costs flow through Services COGS, while hardware revenue deferrals expand in December, adding pressure ahead of monetization – similar to what AAPL did in CY11 when it launched iCloud.”

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