On Friday, Goldman Sachs reiterated its Buy rating on Apple Inc. (NASDAQ:AAPL) with a steady stock price target of $226.00. The firm's assessment follows Apple's second-quarter earnings for fiscal year 2024, which aligned with their projections and surpassed consensus estimates. The performance was particularly bolstered by the Services division's gross profit and other income.
Apple reported earnings per share (EPS) of $1.53 and revenue of $90.8 billion for the quarter, which met Goldman Sachs' expectations. The company's guidance for the third quarter was also better than anticipated, contributing to the firm's continued confidence in the tech giant. Additionally, Apple achieved record Services gross margins during the period.
The company has also announced an increase in its share buyback authorization to a record $110 billion, up from $90 billion the previous year. This move is supported by the board's confidence and is seen as a positive indication of Apple's near-term free cash flow expectations. Apple's performance in Greater China was highlighted, with noted improvements in iPhone sales in Mainland China.
Apple has reached a record installed base across all devices and geographic segments. The company also reported clean iPhone channel inventories, which saw a quarter-over-quarter decline. Effective expense management was observed, with operating expenses maintaining single-digit year-over-year growth.
Looking forward, Goldman Sachs anticipates a year filled with catalysts for Apple, including increased clarity on the company's generative AI initiatives at the Worldwide Developers Conference (WWDC), upcoming product launches such as the "Let Loose" event and a new iPhone release, as well as continued momentum in its Services business.
The firm believes that the resilience of Apple's installed base is not fully recognized and expects Apple to enhance revenue per user by increasing hardware units per iPhone user, improving product price and mix, and expanding Services attachment and monetization as the company invests in its ecosystem.
InvestingPro Insights
Following Goldman Sachs' optimistic outlook on Apple Inc. (NASDAQ:AAPL), it's worth noting that the company's strategic financial management is reflected in its aggressive share buyback program, as highlighted by InvestingPro Tips.
This aligns with Apple's recent announcement of an increased share buyback authorization, signaling management's confidence in the company's financial health and commitment to returning value to shareholders. Moreover, Apple's consistent dividend growth, with dividends raised for 12 consecutive years, underlines its reliability as an income-generating investment.
On the financial metrics side, Apple's market capitalization of $2.67 trillion and a P/E ratio of 26.8 showcase its massive scale and market valuation. Despite a slight decline in year-over-year revenue growth, the company's gross profit margin remains robust at 45.03%, indicating efficient cost management and strong profitability. These figures, coupled with a relatively low dividend yield of 0.55%, suggest that investors are more focused on Apple's growth and share value appreciation than on current income.
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