KeyBanc Capital Markets has elected to maintain a Sector Weight rating on Apple (NASDAQ:AAPL) after the company released its fiscal first-quarter 2026 results. Apple was trading at $258.28 and carried a market capitalization of $3.8 trillion at the time of KeyBanc’s assessment, placing it squarely within the Technology Hardware sector.
In its review, KeyBanc highlighted several notable performance indicators from the quarter. iPhone revenue expanded by 23% year-over-year, and reported earnings per share rose by 18% for the period. InvestingPro data referenced by analysts showed Apple scoring a perfect Piotroski Score of 9, a marker the firm used to underscore the company’s strong financial position.
Apple’s forward guidance for fiscal second-quarter 2026 also factored into KeyBanc’s view. Management projected total revenue growth of between 13% and 16% for the quarter, a range that exceeds the market consensus estimate of 10%. That outlook builds on Apple’s trailing twelve-month revenue growth of 6.43%, according to the same data cited by KeyBanc.
On profitability, KeyBanc noted Apple expects to sustain gross margins around 48.5% even as it confronts rising component costs and tariffs - headwinds the firm explicitly referenced. This guidance is in the vicinity of Apple’s current gross profit margin, which stood at 46.91%.
Despite acknowledging the strength of the results, KeyBanc wrote it was left "without a bear case," yet chose to hold a neutral view. The firm pointed to expectations of growth deceleration and what it regards as a full valuation as reasons to recommend a wait-and-see approach for investors.
Valuation measures referenced in analysis and InvestingPro output show Apple trading at a high price-to-earnings ratio of 34.65 and a price-to-book multiple of 51.49, metrics that InvestingPro’s Fair Value framework characterizes as indicative of overvaluation. Investors were directed to Apple’s Pro Research Report and additional ProTips available through InvestingPro for deeper analysis.
In the company’s reported financials, Apple delivered results above analyst consensus. Fiscal first-quarter 2026 revenue totaled $143.76 billion and diluted earnings per share were $2.84, outperforming FactSet consensus expectations of $138.39 billion in revenue and $2.67 in EPS. Total sales rose 16% year-over-year for the quarter.
Component lines of the business showed particular strength. iPhone sales were a key contributor, up 23% year-over-year, with iPhone revenue reaching $85.3 billion. Services revenue increased by 14% for the quarter. Geographically, China stood out with sales there climbing 38% year-over-year.
The market reaction among sell-side firms was mixed in tone but tilted positive on price targets. Goldman Sachs raised its price target on Apple to $330 while maintaining a Buy rating; BofA Securities reiterated its Buy rating with a $325 target. Rosenblatt Securities increased its price target to $267, citing stronger-than-expected iPhone demand relative to company guidance. Wedbush kept an Outperform rating and set a $350 target, calling the iPhone strength a "surprise tailwind." Oppenheimer maintained its Perform rating while noting the company’s solid financial results.
Key themes emerging from the quarter include robust product demand, particularly for the iPhone; persistent margin resilience even with cost pressures; and an elevated valuation profile that tempers some analysts’ recommendations. KeyBanc’s decision to remain at Sector Weight reflects the balance between strong near-term results and concerns about future growth and price paid.
Summary: KeyBanc kept its Sector Weight rating on Apple after the company reported fiscal Q1 2026 results showing 23% iPhone revenue growth, 18% EPS growth, and guidance for Q2 revenue above consensus. The firm cited margin resilience but maintained a neutral stance due to anticipated slowing growth and what it deems a full valuation.
Key points:
- Apple reported fiscal Q1 revenue of $143.76 billion and EPS of $2.84, beating FactSet consensus of $138.39 billion and $2.67 respectively.
- iPhone revenue rose 23% to $85.3 billion; Services revenue grew 14%, and China sales increased 38% year-over-year.
- Analysts remain mixed on recommendations despite strong results: several firms raised price targets or reiterated Buy/Outperform ratings while KeyBanc stayed Neutral (Sector Weight) citing valuation and expected slowing growth. The Technology Hardware sector is most directly impacted, with implications for device suppliers and component vendors.
Risks and uncertainties:
- Slowing growth expectations - KeyBanc noted a prospect of decelerating growth as a reason to keep a neutral stance, affecting investor returns in the Technology Hardware sector.
- Full valuation - Apple’s elevated multiples (P/E of 34.65 and P/B of 51.49) suggest limited upside under current price levels, posing valuation risk to equity investors.
- Rising component costs and tariffs - These factors create margin pressure despite management’s target for gross margins near 48.5%, presenting an operational risk for Apple and suppliers in the technology supply chain.