pple Inc. (NASDAQ: AAPL) continues to demonstrate resilience and strong growth potential, despite facing challenges in key markets, particularly China. According to CFRA’s latest stock report, equity analyst Angelo Zino, CFA, maintains a “Buy” rating on Apple, setting a 12-month target price of $270, up from the previous $260, reflecting confidence in Apple’s robust financial position, expanding AI capabilities, and aggressive share repurchase program.
Key Financial Highlights
- Current Stock Price: $245.55 (as of February 21, 2025)
- 12-Month Target Price: $270.00
- Projected EPS Growth: $7.43 in FY 2025, rising to $8.26 in FY 2026
- Free Cash Flow (FCF) Estimate: Over $120 billion in FY 2025, with an 8%-10% annual growth projection
- Gross Margin: Expected at 47%-48% in FY 2025 and FY 2026, up from 46.2% in FY 2024
Strategic Growth Drivers
AI and Services Expansion
One of the major bullish factors for Apple is its growing focus on AI-driven features and services. The first set of Apple Intelligence (AI) features will be rolled out in the U.S. in 2025, with additional languages like Chinese, French, Japanese, and Spanish expected later in the year. Apple’s AI strategy is projected to increase user engagement and drive higher-margin revenue streams in Services, which already accounts for 25% of Apple’s FY 2024 revenue and grew at an impressive 13% year-over-year.
Apple’s partnership with Alibaba to develop AI features tailored for the Chinese market is also a critical development that could mitigate recent sales declines in the region.
iPhone Sales Outlook & AI Adoption
While iPhone sales showed no growth in FY 2024, CFRA expects a return to growth in FY 2025. The newly launched iPhone 16 series, despite weak sales in China, is poised to drive revenue through higher selling prices, AI integrations, and an aging installed base of over 1.5 billion devices.
Additionally, Apple’s first-ever internally designed 5G modem (C1) will debut in the iPhone 16e, replacing Qualcomm chips. This transition to in-house modems is expected to enhance margins over the next two to three years.
Aggressive Share Buybacks & Cash Reserves
Apple remains committed to aggressive capital allocation, with a $110 billion share repurchase program in place. The company has already returned $916 billion to shareholders since 2012, with expectations to surpass $1 trillion by the end of 2025.
With a net cash position of $45 billion and strong free cash flow, Apple has the flexibility to continue rewarding shareholders while investing in innovation.
Challenges and Risks
Despite its strong financials and innovation pipeline, Apple faces several risks:
- China’s Weak Demand: iPhone sales in China declined 11% YoY in the latest quarter, impacted by Huawei’s resurgence and broader economic challenges.
- Regulatory Pressures: The U.S. Department of Justice’s antitrust lawsuit against Apple could pressure its App Store revenue model, particularly the 30% commission fees.
- Currency Headwinds: A stronger U.S. dollar remains a downside risk, impacting international sales and earnings.
Conclusion: A Resilient Investment Opportunity
CFRA’s Buy rating reflects confidence in Apple’s AI-driven growth, expanding services ecosystem, and strong financial discipline. Despite short-term challenges, Apple’s ability to monetize AI, sustain high-margin services, and execute share buybacks positions it as a compelling long-term investment.
Investors looking for growth with stability should keep an eye on Apple’s AI rollout, China sales recovery, and upcoming product innovations, including foldable devices expected in 2026.
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