After Goldman Last week, Apple (NASDAQ:AAPL) also left Evercore ISI’s lists of top Buy-rated stocks, the broker’s analysts revealed in a Friday note.
Specifically, Evercore removed the tactical outperform rating on AAPL, mainly due to the tech giant’s earnings report for the December quarter.
Apple exceeded expectations in its December quarter, reporting revenues of $119.6 billion and earnings per share (EPS) of $2.18, compared to the consensus estimates of $118 billion and $2.10, respectively.
This represents a year-over-year sales increase of 2%, driven by a 6% rise in iPhone sales and an 11% increase in services, despite a 25% drop in iPad sales and a 10% decline in wearables.
However, analysts are concerned due to Apple's softer guidance for the March quarter, projecting revenues of about $90 billion, versus the expected $96 billion, and an EPS of approximately $1.50, below the anticipated $1.58.
The expectation that iPhone revenues will remain flat year-over-year adds to these concerns.
Moreover, revenue from China decreased by 12% year-over-year, with iPhone sales experiencing a mid-single-digit decline in the region.
“Weakness in China was more around wearables and iPads – reflecting a weaker consumer spending environment,” analysts wrote.
On a positive note, AAPL's improving gross margins are expected to be between 46-47% for the March quarter and help mitigate revenue shortfall impacts.
Other positive developments include increased Vision Pro app availability, plans to unveil Generative AI products later this year, and a 10% growth in the iOS install base to 2.2 billion.
“While we understand the disappointment around Mar-qtr guide we think iPhone units are largely flat excluding some 1x dynamics,” the analysts said.
“More importantly, we see a host of tailwinds stacking up in AAPL’s favor ranging from Gen AI product launches to Vision Pro adoption to sustained FCF generation/uptick to capital allocation,” they added.