04:27 PM EDT, 07/29/2024 (MT Newswires) -- Apple ( AAPL ) is on track for a modest fiscal third-quarter beat amid ongoing services revenue growth while investors will likely focus on the recovery in China and any commentary related to the upcoming launch of artificial intelligence-enabled iPhones, BofA Securities said Monday.

The brokerage is modeling revenue and earnings per share of $84.5 billion and $1.35, respectively, for the June quarter, which is slightly ahead of the consensus views of $84.4 billion and $1.34. Apple ( AAPL ) is scheduled to report earnings after the market closes on Thursday.

Investors will be looking for revenue growth in China and commentary around market share gains after the key region's top line declined 8% year over year in the second quarter, according to analyst Wamsi Mohan. After services revenue advanced 14% last quarter, BofA is modeling for a similar growth rate in the third and fourth quarters.

Investors may also focus on the September launch of Apple's ( AAPL ) iPhone 16 and other products that will be enhanced with AI, according to Mohan. In particular, they may want to know how the new technology will drive monetization on hardware and services, he said.

In the fiscal fourth quarter, which will end in September and include roughly a week of new iPhone sales, BofA maintained its iPhone unit estimate at 55 million, above Wall Street's 50.7 million forecast. Its revenue and EPS estimates of $98.6 billion and $1.63 for the fourth quarter are ahead of consensus views at $93.6 billion and $1.56, respectively, according to the note.

"We see pent up demand and a meaningful number of older iPhones in the installed base, and the new AI features should help drive an upgrade cycle," Mohan said while reiterating a buy rating and a $256 price target on the stock. The rating reflects potential benefits being unlocked by generative AI, gross margin upside, and momentum in services, the report showed.

Looking ahead, BofA lowered its fiscal 2024 EPS estimate by a penny to $6.68 and its revenue target to $393.42 billion from a prior view of $393.73 billion. The brokerage is now modeling fiscal 2025 EPS of $7.65, down from $7.67 previously, and revenue of $434.87 billion, reduced from a prior forecast of $435.57 billion.

BofA lifted its 2024 iPhone unit estimate to 227 million, reflecting annual growth of 4%, compared with an earlier 226 million-unit projection. Its 2025 target was lowered to 241 million units from 247 million. Fiscal 2026 revenue, EPS and iPhone unit estimates were lifted.

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