JPMorgan Lowers Apple Price Target to $355

JPMorgan analyst Samik Chatterjee lowered the price target on Apple (NASDAQ: AAPL) to $355 (from $360) while maintaining an Overweight rating.

“The primary discussion around AAPL shares following the earnings print will likely be around the changing trajectory of Hardware vs.

Services growth, where despite the concerns around supply constraints as well as price elasticity following significant price increases, Product (and iPhone) revenues have delivered to expectations, while on the flip-side we have seen a steady moderation in the growth rate for Services, which is increasingly going to call into question the long-term Services growth rate when faced with mobile gaming headwinds, app store business model changes and 3P licensing (i.e. including Google in our view) headwinds.

On the Services front, we believe Apple is still in the early days in relation to the roll-out of the revamped Siri AI which will lay the groundwork for its opportunity with monetizing services with the installed base, that reached a record over 2.5B devices, and will likely evolve to keep abreast with the industry’s move towards consumer agents in time; in the meantime, before the incremental monetization drivers start to contribute meaningfully, we might be in a relatively new phase for the company wherein Hardware is the driver of growth in revenue and earnings with the launch of a refreshed line up of new devices across iPhones, iPads, and Macs positioned to support the sustainability of the robust revenue growth demonstrated recently.

On the hardware front, positives included the iPhone revenue beat in F4Q despite supply chain constraints as well as moderating processor-related constraints into F1Q, and improving supply ramp on Duo – although visibility into timing of meeting demand remains less clear at this time.

Following the print, we are raising our Product revenue forecasts for FY27 with the large majority of the upward revisions led by Mac, iPad and stronger pricing outcomes on iPhone revenues, while our Services revenue growth outlook as well as company gross margins moderate on the combination of challenging gross margin mix (lower revenue growth for high-margin Services relative to higher revenue growth for lower-margin Products) as well as headwinds to both Services and Products gross margins on a stand-alone basis; the net effect of which leads to lower earnings forecasts for the company.

However, the positive drivers of a stronger hardware product cycle will lead to a stronger growth outlook for the installed base, which drives the opportunity for a recovery in the Services growth trajectory through a broadening of offerings and across geographies, overcoming the near-term headwinds.

We are reiterating our Overweight rating on the shares long-term with the strength of the hardware product cycle enabling Apple to steadily deliver to a Services opportunity in line with investor expectations as it continues to roll-out and further refine its innovation associated with Siri AI in conjunction with the related monetization.”

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