Apple (NASDAQ:AAPL) is gearing up for a significant rebound in the second half of fiscal 2025, driven by the highly anticipated launch of new product cycles, including a ‘slim’ iPhone, and sustained momentum in its lucrative Services division, even as it contends with rising tariff costs and ongoing regulatory challenges.

On Monday, Bank of America Securities analyst Wamsi Mohan reaffirmed a Buy rating on Apple, maintaining a price forecast of $235.

As Apple prepares to release its fiscal third-quarter earnings on July 31, investor sentiment, as noted by Mohan, remains somewhat subdued.

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Key concerns include escalating tariff-related costs, scrutiny from the Department of Justice regarding Google’s traffic acquisition cost (TAC) payments, ongoing headwinds for the App Store, and the perceived slow pace of Apple’s advancements in artificial intelligence.

Nevertheless, the impending earnings call is expected to shift focus towards gross margin trends and the projected recovery trajectory fueled by forthcoming product launches.

For fiscal third-quarter 2025, Mohan projects revenue of $90.2 billion and earnings per share (EPS) of $1.45, figures that slightly surpass consensus Street estimates of $89.3 billion and $1.43, respectively.

The analyst anticipates a gross margin of approximately 46.1%, aligning with Apple’s guidance midpoint, despite the absorption of an estimated $900 million in tariff-related costs.

Looking ahead to the fourth quarter, projections indicate revenue of $99.5 billion and EPS of $1.66, largely in line with Street expectations.

While gross margin is projected to dip to 45% due to an additional $1 billion in tariff impact, Mohan views this quarter as a trough, with margins expected to improve heading into fiscal 2026.

Mohan noted that a key driver of this expected rebound is the highly anticipated “slim” iPhone, potentially branded as the iPhone “Air,” which Apple is likely to launch in fall 2025.

The analyst said that this model, expected to replace last year’s Plus version, will reportedly have a 6.6-inch display, measure just 6mm thick, and carry a price tag $100 higher than the Plus.

He noted that the shift in product mix toward higher average selling prices (ASP) is anticipated to drive gross margin expansion and boost replacement rates. Mohan modeled stronger iPhone sales in the September and December quarters on the back of this launch.

On the Mac front, Apple is expected to benefit from the March launch of the new MacBook Air featuring the M4 chip, which provides improved performance at a reduced entry price of $999, or $100 lower than its predecessor, the analyst noted.

He said this is expected to drive better-than-seasonal Mac revenue in the June and December quarters. Similarly, Mohan said the iPad segment could receive a boost from the expected fall launch of iPad Pro models equipped with the M5 chip. The analyst anticipates revenue growth in iPads driven by higher ASPs and product upgrades.

Apple’s Services segment continues to show steady growth, Mohan noted. For the third quarter, he expects Services revenue of $27.1 billion, up 2% quarter-over-quarter and 12% year-over-year.

Substantial year-over-year gains are projected across the App Store (+12%), Licensing (+18%), Subscriptions (+9%), and Apple Pay (+18%), as per the analyst.

For the fourth quarter, Services are projected to rise another 3% sequentially to $28 billion, again marking a 12% annual increase, with Licensing and Apple Pay both expected to grow over 20% year-over-year, Mohan noted.

Mohan slightly raised estimates for the full fiscal year 2025. Revenue is now forecast at $409 billion (up from $408 billion), and EPS at $7.15 (up from $7.13). The price forecast remains $235, based on a 29x multiple of fiscal 2026 estimated EPS of $8.20.

While Apple faces near-term margin pressure and regulatory noise, Mohan noted upside potential in new product cycles, improving Services momentum, and ASP-driven gross margin recovery, positioning the stock for renewed strength in the back half of the year.

AAPL Price Action: Apple stock is trading higher by 0.10% to $214.06 at last check on Monday.

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