Apple Inc. (NASDAQ:AAPL) has been slow to roll out artificial intelligence, but the company’s Q1 results confirm that it is still a leader in consumer technology.
The multinational reported a record revenue of $143,76 billion on earnings per share $2.84 – easily beating the Street expectations.
As the iPhone 17 cycle got into full gear, smartphone revenues soared 23% over last year.
Apple’s stock rose 5% after hours as investors cheered its release. The results quietened critics, who had doubted Apple’s growth prospects in the near term during the transition to an AI-first age.
Apple stock remains inexpensive despite post-earnings surge
Samik Chatterjee, senior analyst at JPM Securities continues to believe that AAPL will continue its upward trend.
Chatterjee’s latest research note argues that Apple still trades at 30x earnings forward, a significant discount to the previous “super cycles” peak.
AAPL’s stock multiple grew to 32x during the upgrade of 5G.
Apple’s current valuation is below the historical highs. This means that the company has “a lot of room to grow” until the market starts to value a multiyear AI upgrade cycle.
Chatterjee’s “buy” rating for the iPhone maker includes a “$315” price target, which indicates a potential gain of 20%.
The importance of services to AAPL’s shares
JPMorgan warns investors to not overreact despite the fact that services revenue came in below Street expectations ($30.01 versus expected $30.07 billion).
Samik Chatterjee, in his research note noted that Apple has “multiple levers for growth” beyond the App store, ranging between iCloud extensions and its booming advertising business.
The focus of the argument for AI-integrated services has shifted.
It is anticipated that the upcoming partnership, which will last for several years, to integrate Google Gemini with Apple’s ecosystem and to completely revamp Siri, will create high-margin income streams.
The analyst informed clients that these “intelligent” services powered by AI could significantly boost revenue per user, outweighing temporary declines in App Store revenues.
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Apple shares are on a positive trajectory, even though Apple iPhone revenues surpassed Street expectations by $6.5 billion during the first quarter.
Apple’s long-term contracts with JPMorgan will limit the margin pressures that higher memory costs may cause.
Apple also expects to lower its current-quarter operating costs, showing discipline in an environment of high spending.
Apple’s earnings per share (EPS) will be boosted by a significant amount as these costs are lower than expected and combined with the robust iPhone demand.
Apple’s shares are expected to reach new highs in the next few months due to a combination of growth on top and efficiency at bottom.
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