Apple Inc. (AAPL), the Cupertino-based tech giant, known as a trailblazer in innovation, appeared to fall behind in the artificial intelligence (AI) race, causing concern among investors. Facing negative revenue growth in fiscal 2023, a trend unseen since the pre-iPhone era, Apple struggled to keep up with its FAANG peers who were riding high on investor confidence.
Despite analysts downgrading AAPL stock earlier this year due to fierce competition in the smartphone market and perceived AI deficiencies, the tides have shifted. Wall Street analysts are beginning to warm up to Apple once again, intrigued by the factors driving this renewed bullish sentiment.
About Apple Stock
Established in 1976, Apple Inc. (AAPL) has a remarkable track record of tech innovation. With a massive market cap of $3.5 trillion, Apple continuously sets new standards with iconic products such as the iPhone, iPad, Mac, AirPods, and Apple Watch, along with the groundbreaking Apple Vision Pro.
Venturing into AI with “Apple Intelligence,” Apple witnessed an unprecedented surge in its stock price, hitting a new all-time high of $237.23, buoyed by positive analyst feedback on its AI initiatives. From lagging behind Big Tech peers at the year’s start, AAPL stock has rallied 16.7% in 2024, narrowing the performance gap with the S&P 500 Index.
Emphasizing its commitment to shareholders, Apple hiked quarterly dividends by 4% and unveiled a historic $110 billion share buyback plan, offering reassurance in its long-term value.
Apple Beats Q2 Earnings Projections
After Apple’s fiscal Q2 earnings release surpassed Wall Street expectations in May, with revenue at $90.8 billion, a 4.3% year-over-year decrease, but slightly better than estimates, Apple stock surged by nearly 6%. Notably, iPhone sales dropped by 10%, hinting at softening demand for the latest models.
While Q3 revenue growth is anticipated to remain modest, Apple executives project double-digit revenue growth in the services sector. Analysts foresee Apple’s profit climbing in fiscal 2024 and 2025, displaying optimism about the company’s future performance.
Apple’s AI Breakthrough
Apple’s dive into AI with “Apple Intelligence” at the Worldwide Developers Conference stands as a pivotal moment. The integration of ChatGPT technology into Siri illustrates Apple’s efforts to close the AI gap with industry leaders, adding innovative features like “Genmojis” to captivate consumers.
The upcoming AI-focused updates are eagerly anticipated to boost iPhone sales, offering a vital catalyst for growth, especially with new iPhone models expected for release in September.
What Do Analysts Expect For Apple Stock?
Morgan Stanley’s bullish outlook on Apple, labeling it a “top pick” and setting a new price target of $273, underscores optimism surrounding the company’s multi-year upgrade potential driven by Apple Intelligence. Loop Capital also upgraded Apple to a “Buy” rating with a Street-high price target of $300, signaling a promising future.
Despite some skepticism earlier in the year, Apple’s strategic push into AI has reinvigorated confidence. With the majority of analysts now advising a “Strong Buy” or “Moderate Buy,” the sentiment towards AAPL stock has notably shifted towards positivity compared to three months ago.
While AAPL stock currently aligns closely with the average analyst price target, Loop Capital’s optimistic $300 target suggests the potential for a significant 33.6% rally from current levels.