With more than halfway into the December quarter, Apple, Inc.’s AAPL performance hasn’t evinced confidence in an analyst at KeyBanc Capital Markets. The company has been on a lean trot amid economic uncertainties and has reported year-over-year revenue declines for four straight quarters now.
The Apple Analyst: Brandon Nispel maintained a Sector Weight rating on Apple stock.
The Apple Thesis: Hardware sales growth in Apple’s December quarter, which happens to be its fiscal first quarter of 2024, will likely be in line with what was seen in the year-ago quarter, Nispel said in a note. The analyst noted that Key Banc First Look Data, which is drawn from the spending of over 1.8 million unique KeyBanc credit card and debit card customers in the U.S., showed that indexed spending fell 6% month-over-month in October, which is better than the three-year average of a 7% drop.
He noted that October typically has a difficult comparison against new iPhones released in September.
Historically over the last three years, Apple’s first quarter hardware revenue has grown, on average, 62% sequentially in the first quarter, which encompasses the key holiday season, Nispel said. He noted that the company did not have any new product launches in October. A later-than-typical iPhone release in September this year could have shifted sales into October, he added.
KeyBanc maintained its estimates on the premise that the trends could be due to timing. “While we
continue to believe that lower upgrade rates and softer customer demand will pressure Hardware revenues for F1Q,” the firm said.
The firm also kept its below-consensus estimates as it continues to believe that “hardware revenues are pressured and valuations remain high.”
Chart courtesy of Benzinga
As seen from the chart, the stock’s relative strength index is around 70, which suggests overbought levels.
KeyBanc’s fair value of $182 for Apple stock is based on 18.7 times its 2024 adjusted EBITDA estimates, a premium over the past three-year multiple of 18.2 times, and a peer group multiple of 15.4 times.
Apple Stock: Apple closed Monday’s session up 0.93% at $191.45, according to Benzinga Pro data.
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