Wall Street expects Apple’s AI updates to power a strong upgrade cycle
Wall Street lauded Apple after the iPhone maker debuted its long-anticipated artificial intelligence vision during its Worldwide Developers Conference Monday . Shares of the Tim Cook-led technology company briefly rose as much as 6.4% Tuesday to a record high , one day after announcing Apple Intelligence. The AI capabilities include integrating OpenAI’s ChatGPT and a slew of cutting-edge improvements to Apple’s Siri digital assistant. The event brought positive reviews from analysts, even prompting D.A. Davidson’s Gil Luria to upgrade shares to a buy. He also lifted his price target to $230 from $200, implying 19% upside from Monday’s close. Apple shares have lagged major technology peers this year due in part to its failure to share a clear-cut AI plan. AAPL YTD mountain Shares this year “We believe yesterday’s presentation rhymes with one of Apple’s previous milestone moments — the transition of digital music from a standalone app with questionable regulatory standing (i.e. Napster) to an experience integrated into existing consumer applications (i.e. iTunes),” Luria wrote, noting that Apple’s access to consumer data and trust can drive “deeply integrated functionality in a way” other tools can’t. Goldman Sachs analyst Michael Ng was “encouraged by the financial implications” of the announcements, noting that new product features should help fuel an iPhone upgrade cycle . The updates also create an opportunity for additional AI monetization down the road. The upgrades give Apple a strong position “with the most differentiated consumer digital agent, while limited backwards compatibility of AI should accelerate device replacement cycles in-line with our [overweight] thesis,” and lay the ground for a return to growth, wrote Morgan Stanley’s Erik Woodring. Woodring sees a set up for a rapid device replacement cycle on the heels of the event, which should power stock outperformance. He forecasts 227 million units in fiscal 2025, rising to 238 million units in fiscal 2026, saying the day’s news was “slightly ahead” of expectations. AAPL 1D mountain Apple shares pop as much as 6.4% to record high Bernstein’s Toni Sacconaghi expects Apple’s new features to not only power a stronger device upgrade cycle, but also push the company to $8 in earnings per share and potentially convince investors to pay close to the stock’s peak valuation. Citigroup analyst Atif Malik called the conference the “best WWDC ever,” noting that the plan hinges on Apple’s advantage in hardware and software integration, while maintaining user privacy. The partnership with OpenAI also creates an opportunity for additional AI models down the road. Meanwhile, Evercore ISI’s Amit Daryanani expects Apple’s lead in silicon will help it handle inferencing, while its trove of user data should help it offer “unique” generative AI optionality. Lingering skepticism To be sure, other analysts worry that Apple’s AI prospects may not be enough to power significant upgrades. “The announcement of Apple Intelligence was a bit disappointing relative to expectations in our view,” wrote UBS analyst David Vogt. “Contrary to consensus, we maintain the view that Apple’s AI strategy will not lead to a significant iPhone upgrade cycle this fall.” Barclays analyst Tim Long also poured cold water on the AI announcements, viewing them as “more of an evolution” and only matching expectations. “While Apple’s software and support from developers is quite strong, we believe the event was not a catalyst from a stock standpoint, as no new hardware was announced and the software features are not meaningful,” Long wrote.
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