Citi maintains a "Buy" rating on Apple Inc. (AAPL), raising the target price to $275 from $255, driven by anticipated catalysts such as the iPhone SE4 launch in March and the iOS 18.4 update in April, which includes a significant Siri enhancement. The report highlights Apple's focus on end-to-end AI security and the recent DeepSeek breakthrough, which could lower costs and optimize AI adoption on devices. Despite a 1% y/y decline in iPhone sales, Apple posted a 5-cent EPS beat for the December quarter, with strong Mac and iPad sales offsetting weaker performance in Greater China, where sales fell 11% y/y.
Citi projects a 32x P/E multiple on FY2026 EPS of ~$8.60, reflecting a 20% premium over the SOX and S&P Hardware Index, justified by expanding gross margins and a growing services sales mix. "We believe a premium is warranted to reflect expanding gross margins, growing services sales mix, gradual Apple Intelligence adoption, and strong balance sheet," Citi notes. The report also acknowledges risks such as macroeconomic conditions, US-China tensions, and regulatory challenges in Europe.
Apple's stock was trading at $246.24, up 3.64% on January 31.