Apple (NASDAQ:AAPL) shares haven’t been catching many breaks lately. As rivals ride the AI wave and Apple is seen as falling behind, the stock has failed to keep pace with the broader AI-driven rally, sliding 6% this month, while the S&P 500 is up 1%.
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J.P. Morgan’s Samik Chatterjee, an analyst who ranks among the top 1% on Wall Street, attributes the recent lackluster performance to a combination of factors. Chatterjee thinks that encouraging signs of strong iPhone 17 demand have been largely eclipsed by investor worries about the effect of the unprecedented surge in memory costs on gross margins, potential sensitivity of iPhone demand to pricing, and some minor concerns stemming from weaker-than-expected intra-quarter data for App Store Services growth.
However, with the tech giant slated to report F1Q26 (December-end) earnings tonight, Chatterjee sees a “positive set up for the shares.”
The stock is currently trading at 30x NTM (next-twelve-months) P/E, slightly below the peak multiples the stock typically reaches ahead of a major iPhone cycle (around 32x before the 5G cycle). This, combined with modest potential upside in both the F1Q26 results and F2Q26 outlook, suggests that even small beats are likely to reinforce investor confidence in the company’s “reliable execution” amid a challenging macro environment, while anticipation builds for the tailwinds from the upcoming iPhone 18 cycle.
As for the results, the 5-star analyst anticipates iPhone revenues will exceed consensus expectations, with anticipated growth of 16%, positioning the company to achieve its highest iPhone revenue growth since September 2021, based on Chatterjee’s estimates.
Regarding Services, App Store revenues are expected to grow roughly 7% year-over-year, below the overall Services guidance of around 14% y/y. Nonetheless, Chatterjee believes Apple has “multiple levers” across other Services to drive strong overall growth, similar to F4Q25 when total Services grew 15% y/y despite the App Store contributing only about 10% growth.
On the issue of rising memory costs, Chatterjee expects only limited margin pressure, as Apple’s long-term supply and pricing agreements, combined with its scale, should result in significantly better component cost outcomes compared with other IT hardware peers.
Lastly, while timing-dependent, Chatterjee thinks operating expenses are likely to come in below the guide, since the main driver of an inflection – fees for access to foundational Gemini models – is expected to ramp in F2Q26 rather than F1Q26.
Based on these factors, the analyst forecasts a modest revenue beat and a robust EPS beat in the quarter, followed by F2Q26 revenue growth of 10%-12%, in line with the F1Q guide.
To this end, ahead of the readout, Chatterjee has raised his price target to $315 (from $305), suggesting the stock will gain 23% in the months ahead. Chatterjee’s rating stays an Overweight (i.e., Buy). (To watch Chatterjee’s track record, click here)
18 other analysts also take a bullish stance here, while an additional 11 Holds and 2 Sells all result in a Moderate Buy consensus rating. Going by the $298.84 average target, a year from now, the shares will be changing hands for a 17% premium. (See AAPL stock forecast)
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.