Evercore ISI analysts maintained their Outperform rating on Apple (NASDAQ:AAPL) with a price target of $220 on the stock. The analysts highlighted Apple’s December quarter results, which exceeded expectations with revenues of $119.6 billion and EPS of $2.18, compared to the anticipated $118 billion and $2.10, respectively.

This reflects a 2% year-over-year increase in sales, or 4% when adjusted for an extra week in the previous year, fueled by a 6% rise in iPhone sales and an 11% increase in services, despite declines in iPad and wearables by 25% and 10%, respectively.

The March quarter guidance suggested a softer outlook, projecting revenues around $90 billion, a 5% year-over-year decrease, and EPS around $1.50, which fell short of expectations. Specifically, iPhone revenues are expected to remain stable year-over-year when accounting for a $5 billion benefit from the previous year. Service revenues are anticipated to grow in double digits, with potential upside from recent price hikes, while other hardware products might see a high single-digit decline. China’s revenues declined by 12% year-over-year, with iPhone sales slightly better but still down in mid-single digits in constant currency. The weaker performance in China was attributed to reduced spending on wearables and iPads. However, Apple anticipates higher gross margins for the March quarter, which could mitigate the impact of revenue shortfalls on the bottom line.

The analysts also pointed out positive developments, including enhanced Vision Pro app offerings, anticipated generative AI product launches, and a 10% increase in the iOS install base to 2.2 billion. Despite the disappointing guidance for the March quarter, the analysts see various tailwinds for Apple, including generative AI product launches, Vision Pro adoption, and continued strong free cash flow and capital allocation.

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