Apple Stock May Decline on Earnings as Optimistic Predictions Are Revised Downward

Apple’s stock may experience a downturn following its earnings report for the June quarter. Analysts at Lynx Equity Strategies have raised concerns about overly optimistic expectations surrounding the company.

Over the past three months, Apple’s stock has increased by 31%, significantly outperforming the Nasdaq’s 12% and the S&P 500’s 10%. This rally has been fueled largely by stronger-than-anticipated sales in China and a well-defined artificial intelligence (AI) strategy.

However, analysts caution that the current high expectations for fiscal year 2025 may be unrealistic. They note that since the Worldwide Developers Conference (WWDC), expectations for FY25 have been elevated to unsustainable levels. Specifically, the analysts believe that forecasts of iPhone growth in the teens and overall revenue growth in double digits are not feasible.

Unlike the March quarter, when Apple’s sales in China surpassed low expectations, the June quarter could present a different scenario with flat sales for Apple amid considerable competition from domestic brands.

Additionally, Lynx Equity Strategies analysts raised concerns about Apple’s AI development compared to that of Google. They pointed out that Google’s advancements in large language models and internal silicon development are currently ahead of Apple’s. Notably, they remarked that Apple Intelligence was trained using Google’s Tensor Processing Units.

The analysts predict that Google’s AI capabilities, particularly in the Android ecosystem, may surpass Apple’s offerings in the near future.

While maintaining a price target of $240 for Apple, analysts express caution regarding the company’s short-term outlook. They specify that their price target adjustment followed the WWDC, where they indicated that the iPhone 16 would initially support only Apple-developed AI applications.

They now project revenue growth for fiscal years 2025 and 2026 at about 7%, in contrast to more bullish predictions from other analysts.

In conclusion, Lynx Equity Strategies emphasize the importance of caution, suggesting that as optimistic estimates are toned down, Apple’s stock may drift lower. They advise investors to wait for a more favorable entry point while retaining a long-term positive outlook on Apple’s AI strategy, albeit with a prudent approach in the short term.