Despite Apple's stock falling 5% in early 2026 due to concerns over commodity cost inflation and the App Store, Goldman Sachs views this as a prime buying opportunity. According to information from trading desks, Goldman Sachs maintained its "Buy" rating on Apple in a January 20th report, with a price target of $320. Analysts emphasized that, considering the continuation of the iPhone upgrade cycle, the anticipated launch of a foldable phone, and the implementation of AI features, the key now is to ignore short-term noise and focus on Apple's strong pricing power and the resilience of its services business.
iPhone revenue surged by 13%, with foldable screens and AI poised to extend the super cycle. Goldman Sachs is optimistic about the upcoming F1Q26 earnings report, expecting Apple to deliver results that exceed market expectations. The report forecasts quarterly revenue of $137.4 billion for Apple, an 11% year-over-year increase. The most notable performance is expected from the iPhone segment, with projected revenue of $78 billion, marking a 13% year-over-year growth. This growth is driven by two key factors: a 5% year-over-year increase in unit sales (with shipments in China surging an impressive 26%) and an 8% year-over-year rise in the Average Selling Price (ASP). Goldman Sachs notes that demand for the iPhone 17 series has outperformed the previous generation, and the future product pipeline will further support this momentum. The highly anticipated foldable iPhone (iPhone Fold) is expected in the autumn of 2026, followed by the iPhone 18 base model and iPhone Air 2 in the spring of 2027. This shift towards a "two-updates-per-year" release cycle, combined with software upgrades for iOS and Siri 2.0, will effectively prolong the upgrade wave. Furthermore, Apple's collaboration with Google Gemini on Siri demonstrates to the market that the iPhone remains consumers' preferred device for accessing AI tools, alleviating competitive concerns.
Storage cost surge concerns: Gross margin could be severely impacted in a worst-case scenario, but Apple has the capacity to mitigate it. The primary point of market contention currently revolves around the erosion of Apple's profit margins by rising storage costs. A global shortage of DRAM and NAND supply has led to soaring prices, with industry reports indicating the cost of a 12GB LPDDR5X RAM chip has skyrocketed from $30 to $70. Goldman Sachs's stress test model indicates that in a "worst-case scenario" with no mitigating measures, a 120%-140% increase in storage costs could potentially reduce Apple's product gross margin by 8 to 10 percentage points, and the overall gross margin by 6 to 7 percentage points. However, Goldman Sachs emphasizes this is merely a theoretical risk. In practice, Apple possesses strong defensive capabilities due to its massive purchasing scale and long-term supply agreements. Even as some long-term agreements near expiration, Apple can offset cost pressures through supply chain management, product redesigns, and price increases. Compared to competitors with lower margins, Apple, as a premium brand, is better positioned to absorb these costs without suffering the severe impacts that lower-cost rivals might face.
Services business grows 14%, App Store slowdown not a major concern. Although App Store revenue growth is expected to slow to 7% in F1Q26, this is insufficient to undermine the overall growth narrative for the services business. Goldman Sachs predicts that Apple's services revenue will grow 14% year-over-year to $30 billion. This growth is primarily driven by strength in other categories, including Traffic Acquisition Costs (TAC), iCloud+, AppleCare+, and subscription services. Investor concerns regarding the App Store mainly focus on diversion to third-party payment systems and macroeconomic influences. However, Goldman Sachs believes that iCloud+ will continue to expand alongside growing data storage needs (driven by AI features and higher-quality media), and that price increases for Apple TV+ subscriptions will also support revenue. Additionally, improvements in Google search traffic support the long-term growth of TAC revenue, demonstrating the stickiness of browser search compared to AI chatbots.
Valuation premium is justified. From a valuation perspective, Apple's current forward Price-to-Earnings (P/E) ratio is approximately 30x, which Goldman Sachs believes is supported by its stable earnings growth. For the F1Q26 quarter, Goldman Sachs forecasts Earnings Per Share (EPS) of $2.66, aligning with market consensus. The gross margin is projected to be 47.7%, at the midpoint of the company's guidance range (47%-48%), which already incorporates approximately $1.4 billion in tariff-related costs. Looking ahead to F2Q26 (the March quarter), Goldman Sachs expects revenue to reach $104.4 billion, with the gross margin improving to 49.1%, above the market's expectation of 47.7%. With the continued strong sales of the iPhone 17 series and the scale benefits of the services business, Apple is well-positioned to deliver robust financial returns while maintaining high shareholder returns (share buybacks and dividends exceeded $110 billion in fiscal 2024).
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