The Apple (NASDAQ: AAPL) share price is expected to enjoy further gains today after posting positive Q1 2025 results Thursday (30 January). The report, published after the US stock market closed, prompted a 3% price rise in aftermarket trading.
Earnings per share (EPS) was up 11% at $2.41, beating expectations of $2.35. Net income grew by 6% to $36.3bn. Revenue enjoyed moderate growth of 3.9% to $124.3bn, also beating expectations.
That’s a considerable improvement on the last quarter, which saw earnings miss expectations by almost 40%
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“Our record revenue and strong operating margins drove (earnings per share) to a new all-time record with double-digit growth,” said CEO Tim Cook.
Despite the positive results, JP Morgan Chase has lowered its price target for the stock to $260 from $265. Several other brokers have downgraded their ratings from Buy to Hold. Analysts at Barclays and Citigroup raised their price targets to $197 and $185 respectively.
Back on top
After briefly losing ground to Nvidia, Apple’s reclaimed its position as the largest company by market cap.
The share price was in decline for most of this year after peaking at $260 on 26 December. The expectation of positive earnings prompted a recovery earlier this week. It now has an above-average price-to-earnings (P/E) ratio of 39, suggesting a slight overvaluation. Usually, this would suppress further growth but with tech stocks, high P/E ratios are common.
Most pressing is the risk of losses posed by currency fluctuations, which analysts estimate could hurt the share price by 2.5%. Some analysts also feel Apple’s at risk of losing market share in certain regions, posing a threat to profits.
Chinese competition
One concern Apple’s been facing is a shift towards locally produced goods in China. The tech giant was aiming for a sales boost from the introduction of new artificial intelligence (AI) tools in the iPhone 16. However, the surprising success of Chinese AI competitor DeepSeek may have dented some of the impact.
iPhone sales in China have already been in decline for some time, down 11.1% year-on-year. Revenue dropped to $15bn in the last quarter of 2024 and market share in the region fell 18% compared to Q4 2023. Overall, iPhone sales came in at $69.1bn, well below the expected $70.7bn.
Recent data reveals locally-produced smartphones are now outpacing foreign phones in the country. Chinese manufacturers Vivo and Huawei enjoyed an increase in market share by 8% and 15.5% respectively.
Looking ahead
Analysts have mixed feelings about Apple stock, with 12-month price targets ranging $188-$325. The average is around $248, representing only a 4.5% rise from the current price.
Despite the positive results, earnings are expected to follow a cyclical pattern of declines in Q2 and Q3. Historically, this hasn’t correlated with the share price, which is up 207% in the past five years. The company expects low-to-mid-single digit revenue growth in the next quarter, potentially offset by a stronger dollar.
The deployment of AI-enhanced features is now a top priority for the company if it hopes to regain market share in the East. However, the results are indicative of Apple’s resilience to the shifting economic landscape and threat of competition abroad.
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