Alexi Rosenfeld/Getty Images
Analyst: Apple holds ‘only keys to the castle’
And while there may be many skeptics, Wedbush analyst Dan Ives believes it.
Ives, who has an outperform rating and a $275 price target on Apple shares, said in a July 8 note that the company could be on track to hit a $4 trillion market cap with the upcoming iPhone 16 AI upgrade cycle.
Related: Analyst Assesses Apple Stock Price Target Based on iPhone Sales
“We think the Street is slowly beginning to recognize that with Apple Intelligence on its doorstep, Cupertino will essentially be the gatekeeper of the consumer AI revolution,” he said in a research note.
Ives said developers and other tech stalwarts will likely need to integrate their AI models and technology into Apple Intelligence in the future, “because Apple and its golden iOS ecosystem hold the sole keys to the castle of 2.2 billion iOS devices worldwide and 1.5 billion iPhones.”
“We expect developers to create hundreds of generative AI apps over the next six to 12 months that will be key ingredients in Apple’s recipe for success,” Ives said, “as its technology stack creates the building blocks for the consumer AI tidal wave we see coming starting with the iPhone 16 in mid-September.”
Apple’s iPhone sales in China fell significantly earlier this year, but Ives said: “June will be the last quarter of negative growth for China, with growth reversing from the September quarter.”
“China remains the pillar of Apple’s growth, and this key region is expected to see growth again, starting with the iPhone 16,” he said.
Speaking of the iPhone 16, Apple is reportedly planning to ship at least 90 million iPhone 16 units in the second half of this year, 10% more than previous launches, according to Bloomberg. The company is counting on artificial intelligence services to boost demand after a turbulent 2023.
Apple has told its suppliers and partners that it is targeting about 10% growth in shipments of new iPhones compared with their predecessors after shipping about 81 million iPhone 15 units in the second half of 2023, Bloomberg reported, citing a person familiar with the matter.
The report says the company is confident that adding some Apple Intelligence features to the iPhone 16 will help drive demand when the model goes on sale later this year.
Artificial intelligence could be an ‘upgrade engine’, analyst says
Investors were excited when Apple announced a $110 billion stock buyback in May, the largest buyback authorization in the company’s history, surpassing the previous $100 billion buyback in 2018.
“Over the last two years, we’ve done $90 billion in revenue, and now we’re doing $110 billion,” Chief Financial Officer Luca Maestri said on the earnings call. “So let’s start getting there. It’s still going to take some time. And when we get there, we’re going to reassess and see what the optimal capital structure is for the company at that point.”
Other AI actions:
“There will obviously be a number of considerations that we will have to take into account when we get there,” he added.
Needham analyst Laura Martin cited the buyout when she raised the company’s price target on Apple to $260 from $220 and kept a buy rating on the stock.
The analyst said the decision to buy back $110 billion of stock comes at a time when other big tech names are spending between $50 billion and $100 billion on Gen-AI infrastructure.
However, she also warned that over a three-year period, Apple’s single-digit revenue growth “appears increasingly at risk.”
Apple, which is scheduled to report third-quarter results on Aug. 1, is expected to grow its advertising business. Ad margins typically run 70% to 80%, which would allow the company to boost margins without raising device prices, Martin said.
Meanwhile, Piper Sandler analyst Matt Farrell discussed the iPhone and China in a research note. He raised the company’s price target on Apple to $225 from $190 and kept a neutral rating on the stock following an analyst change.
Farrell said that since early April, Apple shares have risen more than 30%, driven by excitement about Apple Intelligence and a potential rebound in iPhone shipments in China.
He added that the enthusiasm was justified because artificial intelligence “could be a driver of upgrades.”
Additionally, a return to growth in iPhone sales in China could create a tailwind in the second half, the analyst added.
However, given the current valuation and the growing risk of a slowdown in consumer spending, Farrell said he felt “a lot of good news is already priced into the stock.”
Related: Veteran Fund Manager Sees a World of Hurt Coming for Stocks
News Source : finance.yahoo.com
Gn tech
