Rothschild Redburn upgrades Apple to Buy; PT $400
Rothschild Redburn upgrades Apple to Buy and sets a $400 price target, citing a large installed base (2.55 billion devices) and high-margin Services, while flagging AI-related disintermediation risks.
AAPL Rothschild Redburn Upgrades AAPL to Buy, PT $400 Analyst comments: "Apple's defining characteristic remains its tight integration of premium hardware, proprietary silicon, and a rapidly expanding services layer.
We calculate that Apple has built an installed base of 2.55 billion devices, and it has a degree of customer retention that few competitors can rival.
The Services business is the most valuable part of the Apple franchise, growing 3x the rate of Products, with gross margins of 75% coming in more than double the 37% earned on Product sales.
However, Apple Services is particularly exposed to changes in how people find information, discover apps, and interact with software.
Closed-source AI models from OpenAI, Anthropic, and others seek to disintermediate Apple's ownership of the consumer, which threatens Apple's highest-margin, highest-multiple business.
While the threat is real, increasingly capable, free-to-access, open-source AI models may allow Apple to revive its Apple Intelligence platform independently.
As a result, Apple may be able to assert itself as the gatekeeper of consumer AI, delegating AI workloads to a subservient fleet of open-source models, monetized via Apple Pay and other payment platforms.
In addition to this strategic opportunity, we forecast iPhone sales to grow at a 12% five-year CAGR, 3-14% above consensus expectations in FY26-30E, led by Apple's entry into the premium foldable market with the launch of the iPhone Ultra.
Stronger-than-consensus iPhone earnings and a strategic reset to Apple Intelligence leave us 18% above FY30 consensus, and we have confidence that Apple's relative valuation multiple is well supported." Analyst: James Cordwell