We're Keeping Our Apple Price Target and Rating After Quarter's Positive Mix Shift
Here are the key price levels to watch as we patiently wait for the iPhone upgrade cycle to accelerate.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
We are seeing some modest price target increases for Apple AAPL following its better-than-expected June-quarter results that benefited from stronger-than-expected iPhone and Services revenue. However, we are keeping our $235 target, as well as our Two rating, in place following the runup in the shares over the last several weeks. From a technical vantage point, AAPL shares are flirting with strong support between the 50-day and 100-day moving averages that clock in between $205-$206.27.
If the shares do not hold those levels, we could see them move even lower near-term, potentially bringing them below our established $205 pickup point. If that comes to pass, we’ll remain on the sidelines and revisit the shares as they find their footing, recognizing that technical support can become technical resistance.
As we do that, given our Two rating and our price target, we’ll be mindful of upcoming July revenue results from Taiwan Semiconductor TSM and Foxconn that could provide a catalyst for the shares should they bring another layer of confirmation for the seasonal smartphone market ramp.
Now the Details…
While many will harp on the better-than-expected iPhone sales, in our view, the shining star goes to Apple’s higher-margin Services revenue, which accounted for 29% of sales in the quarter but more than 47% of its overall gross profit dollars, up from 45% in the March 2025 and June 2024 quarters. Helping drive that positive mix shift in the quarter was Apple’s install base of active devices reached another all-time high across all product categories and geographic segments.
During the earnings call, Apple said that its iPhone 16 family grew double digits compared to the iPhone 15 in the year-ago quarter. That speaks to the power of the upgrade cycle as well as consumers shifting toward premium models with larger displays and higher price tags. And yes, those larger displays, which are now all organic light-emitting diode ones, are another reason we remain upbeat on shares of Universal Display OLED.
While we see that upgrade cycle continuing, we are entering the time of year when potential iPhone buyers are caught between buying from the existing line-up or waiting for the next ones to be announced. Typically, that happens in early September with the models hitting shelves late in the quarter. This time around, however, we could see higher average selling prices (ASPs) for those new models thanks to the impact of tariffs. Apple estimates the impact of known tariffs to be around $1.1 billion in the current quarter, up from $800 million in the June quarter.
While the iPhone install base is aging, staring down higher ASPs for the next generation iPhone, our thinking is that folks will need a reason to upgrade. One of the levers to foster that will be progress on Apple Intelligence. Apple has released some AI features already, with more to come this year, but those tied to a more personalized Siri aren’t expected until next year. Apple telegraphed more AI investing ahead, which is not surprising, but, in our view, the company either needs to deliver before too long or contemplate using its balance sheet and M&A to catch up. Given the importance of that to iPhone and Apple’s other products, we suspect one or both of those moves could happen.
Near-term, waiting for that to happen and trickle down into its software offering, not to mention potentially higher ASPs ahead, could lead to a slower-than-expected iPhone upgrade cycle. As Apple figures it out, and odds are they will, that also means we are likely to see a more powerful upgrade cycle down the road, potentially as soon as next year. While some may be inclined to throw in the towel, as we’ve said before, that upgrade cycle is the opportunity we see in the company’s earnings and Apple shares.
In our view, it is worth sticking around while the higher-margin Services business becomes an even larger part of Apple’s mix, smoothing out Apple’s bottom line along the way.
At the time of publication, TheStreet Pro Portfolio was long AAPL and OLED.
