Apple's shares (AAPL +1.21%) have had an astounding year, with an increase of over 45% in 2023. Despite such a significant gain, many analysts believe the stock still has room to grow. Indeed, of almost 40 analysts covering the stock, most recommend buying shares at the current level.
Among some of the most optimistic Apple analysts is Ivan Feinseth, a financial analyst at Tigress Financial. Last week, Feinseth confidently raised his price target for the company's stock from $225 to $240 for the next 12 months. Moreover, he reaffirmed his "strong buy" rating for the tech stock. To put this in perspective, this target represents a potential gain of around 26% from the current trading price.
NASDAQ: AAPL
Key Data Points
Key catalysts
Backing up Feinseth's upbeat view for Apple stock is a prediction that the company will see a reacceleration in its top-line growth rates in 2025. How can an investor remain so bullish even as the company's revenue fell nearly 1% year over year in fiscal Q4? First and foremost is Apple's strong momentum in its important high-margin services business. Its services revenue rose 16% year over year to an all-time quarterly record of $22.4 billion during fiscal Q4.
"We achieved all-time revenue records across App Store, advertising, AppleCare, iCloud, payment services, and video as well as a September quarter revenue record in Apple Music," explained Apple CEO Tim Cook during the company's fiscal fourth-quarter earnings call.
Next, there's the well-timed refresh of Apple's important MacBook Pro lineup. Feinseth is particularly bullish on Apple's new Macs, as he expects demand for personal computers to heat up next year. This gives Apple a great new Mac product line at an ideal time.
Apple CFO Luca Maestri certainly expects a significant improvement in its Mac business during the holiday quarter (fiscal Q1). "We expect Mac year-over-year performance to significantly accelerate from the September quarter," Maestri said during the call.
A reacceleration is almost inevitable
Feinseth may be onto something. Talking about a likely upcoming reacceleration at a time when Apple's top line is contracting may sound contrarian, but it's actually not.
Yes, management said it expected its fiscal first-quarter revenue to be flat compared to the year-ago period. But the year-ago quarter included an extra week compared to the current quarter, and management estimates that having this extra week would have added approximately 7% more revenue to the current period. So, you could say that when adjusting to exclude revenue from the extra week in the year-ago quarter, Apple also expects a significant acceleration during the holiday quarter.
Another big bullish point that may be getting overlooked is how well Apple's iPhone business is doing. The important segment returned to growth in fiscal Q4, with iPhone revenue rising 3% year over year.
Further, management said it expects iPhone revenue to increase in fiscal Q1 despite the quarter having one fewer week than the year-ago period. As a halo product that helps drive services revenue and keeps customers engaged in the overall Apple ecosystem, continued growth in iPhone as we enter fiscal 2024 is good news for shareholders.
Of course, other aspects of Apple's business -- from upcoming products like Apple Vision or even new products or services Apple hasn't announced yet -- could drive growth, too.
Apple's current valuation of 31 times earnings is already quite high. However, given the high-quality business that Apple is, it deserves to trade at a premium. However, a price target of $240 per share could be a stretch. This target arguably assumes near-perfect execution from Apple.
Further, if Apple fails to return to meaningful revenue growth levels by next summer, it could lead investors to reconsider whether the stock is still attractive. Nevertheless, shares do seem like an attractive long-term investment, given the information we have today.
