Apple gets a tactical outperform call at Evercore

Investing.com — Evercore ISI analysts issued a Tactical Outperform call for Apple Inc (NASDAQ:) on Sunday, expecting the iPhone maker to report earnings results in line with current estimates, which could lead to a positive performance for the stock.

Despite the recent bearish sentiment around Apple, particularly concerning its position in the Chinese smartphone market, Evercore analysts suggest that the perceived risks may be “overstated.” They believe this can be “offset by growth in developing markets and a strong upgrade cycle in the US where our survey work points to strong upgrade demand, driven in part by AI.”

Apple shares climbed 0.6% in premarket trading Monday.

Evercore also highlights that challenges faced by Apple’s main China competitor, Huawei, such as chip supply shortages, are primarily affecting the lower end of the iPhone lineup. Moreover, it points to potential government stimulus in China that could spur demand across the smartphone sector, benefiting all players, including Apple.

“The staggered rollout of AI should also result in a stronger for longer iPhone upgrade cycle as the release of new features and new geographies should drive strong word of mouth advertising,” analysts added.

Furthermore, Evercore’s team has a bullish outlook on Apple’s Wearables and Services segments. The release of new products such as the Apple Watch, Watch Ultra, AirPods 4, and USB-C AirPods Max is expected to significantly accelerate wearables revenue in the December quarter.

Gross margins are anticipated to benefit from a higher iPhone mix during the same period, although this could be balanced by a relatively lower mix of Services revenue.

“We think Apple is well positioned to outperform against low expectations in the Sept-qtr and more importantly on the Dec-qtr guide,” analysts concluded, reiterating an Outperform rating on the stock and a $250 price target.