Apple (AAPL) Faces Margin Pressures Ahead of Earnings — BofA Still Says Buy

Apple Inc. (NASDAQ:AAPL) is one of the Trending AI Stocks on Wall Street. On July 28, Bank of America maintained a “Buy” rating on the stock with a price target of $235. The firm believes that Apple faces a tough setup as it heads into its third fiscal quarter results due on July 31^st. Investors continue to watch closely for margin pressures from tariffs and ongoing regulatory concerns.

“We see client sentiment as fairly negative given uncertain impact from tariffs, U.S. DOJ investigation (Google (NASDAQ:GOOGL) TAC payments), App Store headwinds, and slow progress in AI.” -BofA analysts wrote in a note.

The firm believes that gross margins (GM) are going to be the highlight of the earnings report, with the June quarter guide of 46% at the mid-point, which includes the “impact of $900mn of tariff-related costs.”

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It models the September quarter period as the “trough,” anticipating gross margins to improve on the back of a “better mix of higher ASP products, including the slim iPhone (‘Air’), which we expect Apple to launch this fall.”

While margin concerns exist, the firm anticipates in-line results for the current quarter and also potentially a slight revenue beat. Upcoming product cycles may also prove to be good for the company, as “iPhone form factor changes have helped drive higher replacement rates in the past.”