Apple (NASDAQ:AAPL) shares surged in early Monday trading, setting the stage for another record-breaking day following price target upgrades from Wall Street analysts.
Apple has added approximately $300 billion in market value since revealing its plans to integrate AI technologies into its upcoming iPhone 16. Investors are betting that these advancements will ignite a significant cycle of new handset purchases.
Dubbed Apple Intelligence, the new technologies mark a significant overhaul for Apple’s Siri digital assistant, along with the introduction of various new features for its extensive hardware base of 2.2 billion devices.
Apple’s strategy focuses on incorporating AI-powered tasks such as summarization, text generation, photo editing, and enhanced search into its ecosystem of iPhones, iMacs, and iPads.
Morgan Stanley analyst Erik Woodring believes that investors are “underappreciating” the impact of the Apple Intelligence launch, describing it as a “clear catalyst for a multiyear product upgrade cycle.”
Apple Named a Morgan Stanley ‘Top Pick’
Woodring, who raised his Apple price target by $57 to $273 per share, predicts the tech giant could ship nearly 500 million iPhones over the next two years due to the upgrade cycle.
“This will drive 5% annual iPhone [average selling price] growth, resulting in nearly $485 billion of total revenue and $8.70 in earnings power by fiscal 2026 (compared to $459 billion and $8.20 previously), which is 7% to 9% above consensus,” said Woodring. He also elevated Apple to a Top Pick for the investment bank among hardware-focused tech stocks.
“Near-term positive catalysts include [fiscal-third-quarter] earnings, the mid-September iPhone launch, and potential positive iPhone build revisions in mid-October,” Woodring added. “Accelerating unit growth historically drives Apple stock outperformance, making the recent outperformance sustainable.”
Loop Capital analyst Ananda Baruah also increased his Apple price target, raising it by $130 to $300 per share while upgrading his rating to buy from hold. He cited the potential impact of an accelerated upgrade cycle.
“Apple has an opportunity over the next few years to solidify itself as consumers’ [generative-AI] ‘base camp’ of choice, akin to its impact with the iPhone for social media and the iPod for digital content consumption,” Baruah wrote, referencing insights from supply-chain analyst John Donovan. “These trends were significant stock catalysts, and we believe generative AI has the potential to be the same.”
Generative AI produces new and original content, including text, images, and video, from existing material.
Apple Earnings in Focus
Apple will report its fiscal third-quarter earnings on Thursday, August 8, after the market closes. Analysts anticipate a bottom line of $1.34 per share on revenue of $84.2 billion, a 2.9% increase from the same period last year.
Apple’s overall revenue for the three months ending in March fell 4.3% from a year earlier to $90.8 billion, surpassing Wall Street forecasts and showing a smaller-than-expected decline in overall China sales. The company also posted a stronger-than-expected bottom line of $1.53 per share, along with operating cash flow of $22.7 billion and an improving gross profit margin of 46.6%.
“Apple’s June quarter is the opening act for the main event in September,” said Wedbush analyst Dan Ives in a recent client note.
“We now believe initial iPhone 16 shipments will be closer to 90 million (with potential for further increase as we approach the launch date in September) compared to original [Wall Street] expectations of 80 million to 84 million, representing a double-digit year-on-year increase.”
Since the Apple Worldwide Developers Conference in early June, “we believe optimism is growing throughout the Asia supply chain that this iPhone 16 AI-driven upgrade could represent a golden upgrade cycle for Cupertino, with pent-up demand building globally,” Ives added.
Apple shares were up 2% in premarket trading, indicating an opening bell price of $235.13 each, a move that would extend the stock’s six-month gain to around 28%.
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