Apple's Q1 in Focus: Analyst Warns of Challenges Despite 4% Revenue Growth Forecast

Apple Inc. (NASDAQ: AAPL) is set to report its first fiscal quarter (Q1) 2025 earnings on January 30, 2025, with analysts expecting a 4% year-over-year revenue growth to $124.32 billion and earnings per share (EPS) of $2.35. However, a top Wall Street analyst has warned of several challenges that could impact Apple's performance, despite the positive outlook.



KeyBanc Capital Markets analyst Brandon Nispel, who maintains an 'underweight' rating and $200 price target on Apple, believes that the data overall appears mixed, with Apple tracking below historical seasonality. He expects below historical average growth in the December quarter compared to Apple's historical averages. Nispel also mentioned that the company is likely to report December-quarter revenues of around $124.33 billion, with iPhone sales rising just 2.1% to $71.2 billion.



One of the main challenges Apple faces is the lack of an AI-driven upgrade cycle for the iPhone 16. Despite Apple's AI ambitions, consumers have not yet shown significant interest in purchasing the new iPhone handsets that feature Apple's new AI software. This lack of demand for the AI-driven features could hinder the upgrade cycle for the iPhone 16.

Another challenge is the potential iPhone 16 ban in Indonesia, which could negatively impact sales in that market. Additionally, stiffer competition in the Chinese market, higher prices, and a stronger U.S. dollar have combined to create headwinds for iPhone 16 sales.

The cheaper iPhone SE is also likely to be cannibalistic to iPhone 16 sales, while iPad, Mac, and Wearables growth is likely to remain muted. Nispel and his team wrote, "iPhone 16 failing to drive meaningful changes to upgrade rates where expectations need to move lower yet again," and that the iPhone SE is likely to be "cannibalistic to iPhone 16 sales."



Apple shares were marked 0.32% higher in premarket trading to indicate an opening bell price of $235.15 each. However, the stock remains in negative territory for the year, and investors should be cautious about the potential challenges ahead.

In conclusion, while Apple is expected to report a 4% revenue growth in Q1 2025, investors should be aware of the potential challenges that the company faces, as highlighted by KeyBanc Capital Markets analyst Brandon Nispel. The lack of an AI-driven upgrade cycle, potential iPhone 16 ban in Indonesia, and competitive pressures in the Chinese market are just a few of the hurdles that Apple must overcome to maintain its growth momentum. As always, investors should do their own due diligence and not rely on the information provided as financial advice.