Will Apple Beat the Odds? Citi Says Yes, KeyBanc Raises Eyebrows

Citi analyst Atif Malik maintained a Buy rating on Apple Inc AAPL with a price target of $230.

Apple stock is up 50% year-to-date versus the S&P500, up 20%, and investors are asking if the stock could outperform again next year. 

Looking into next year, Malik modeled double-digit EPS ~14% and FCF ~11% growth on continued gross margin expansion. 

Malik noted that the bears on the stock are missing the structural gross margin expansion story driven by iPhone premiumization, acceleration in services sales, and the silicon insourcing benefit and favorable commodity prices that drove P/E multiple expansion this year. 

Malik expected the above trends to continue next year and viewed AI Phones and Vision Pro adoption as potential upside catalysts. 

KeyBanc analyst Brandon Nispel maintained a Sector Weight rating on Apple.

The analyst maintained his below-consensus Q1 FY24 Hardware revenue estimates. 

Nispel's Key First Look Data shows Indexed Spending -5% month-on-month in November, below the 3-year average of +11%. 

Quarter-to-date, he saw back-to-back month-on-month declines, which appear negative entering Holiday shopping. 

Overall, Nispel's data tells him to expect below-average growth for Q1 FY24. 

Although October benefited from timing around iPhone, he would have thought November would be better given a push in timing around Mac to November and Black Friday shopping. 

Nispel tweaked his FCF estimates to reflect working capital assumptions, though he maintained his below-consensus Hardware revenue estimates. 

With AAPL trading at 19.3x, FY25 adjusted EBITDA versus the 3-year, 10-year, and peer averages at 18.7x, 12.0x, and 14.8x, respectively, Nispel finds AAPL expensive.

Nispel projected Q1 revenue and EPS of $116.8 billion and $2.07.

Price Action: AAPL shares traded lower by 0.23% at $197.50 on the last check Thursday.