AAPL Earnings Preview: Analysts Predict 10% Stock Surge Amid AI Innovations and Tariff Challenges

Apple Inc. (AAPL) is poised to release its fiscal third-quarter earnings following today's market close. Despite hurdles such as tariffs and artificial intelligence (AI) challenges, the majority of analysts maintain a positive outlook for the iconic iPhone maker. Out of 12 analysts surveyed on Apple stock, nine express a "buy" sentiment, accompanied by two holding a "hold" stance, and one advocating a "sell." The consensus price target hovers around $233, suggesting a 10% increase from its recent close of approximately $211.

Goldman Sachs has issued a bullish $251 price target, highlighting expectations for resilient services revenue growth. Anticipation surrounds Apple's introduction of innovative AI features this fall, such as live translation across Messages, Phone, and FaceTime, which are poised to boost demand for iPhone upgrades.

The expectations for Apple's June quarter results are set against a backdrop of modest growth forecasts, as revenue is anticipated to reach $89.54 billion, marking a 4% year-over-year increase. This includes $40.45 billion in iPhone sales, reflecting 2% growth, and $26.81 billion in services revenue, indicating an 11% rise. Projected earnings per share are $1.44, a slight uptick from $1.40 a year earlier. However, potential challenges include looming Section 232 tariffs, with Morgan Stanley noting these as a critical overhang stemming from national security concerns.

Morgan Stanley maintains its optimistic view with a $235 price target, slightly above the consensus, while HSBC retains a more conservative $220 target amid similar regulatory uncertainties. Investors are also keenly observing developments in Apple's AI segment, particularly following setbacks with Siri and its limited deployment in China. Notably, Apple reportedly remains unlikely to match rivals, as exemplified by Google's recent capital expenditure increase.

As Apple confronts these challenges, the question of iPhone demand persists, particularly in the U.S., where sales waned in June after a tariff-induced surge in preceding months. While Apple contends with a 16% stock depreciation year-to-date, successfully navigating tariff costs and AI advancements could alter its trajectory.

On a brighter note, Apple's venture into entertainment with "F1: The Movie" has proven fruitful, securing over $510 million globally—underscoring Apple's potential beyond traditional tech boundaries. In China, Apple's iPhone shipments achieved growth for the first time since late 2023, according to estimates, albeit facing struggles domestically with an 18% sales decline in June.

Apple's ongoing adaptations include reacting to pressure from the Trump administration to bolster U.S. manufacturing, illustrated by plans for a Detroit manufacturing academy. This aligns with its broader commitment to U.S. investment, promising $500 billion over four years and creating 20,000 jobs.

Investors and analysts await Apple's earnings call later today, attentive to the potential ramifications of heightened tariffs and AI strategies. Bank of America underscored the significant impact tariffs could have on margins but suggested new product introductions might offset this. The promise of a slimmer iPhone Air could be a substantial catalyst, possibly replacing the Plus model at a higher price point.

Melius Research hinted Apple could venture further into AI territory, potentially acquiring Perplexity to enhance Siri and maintain competitiveness. Wedbush, voicing concern over Apple's current position in the AI race, similarly insinuated an acquisition could invigorate investor confidence. Conversely, Morgan Stanley downplayed the urgency of AI in Apple's broader strategy, instead advocating a focus on revenue growth, which they project to outstrip Wall Street expectations.

CFRA Research centers its analysis on CEO Tim Cook's tone during the earnings call, postulating guidance will be paramount. Ultimately, the narrative will unfold this evening when Apple reveals its fiscal Q3 performance, offering investors insights into its strategic direction amid prevailing uncertainties.