Apple shares are on the verge of reaching a new all-time high as Wall Street becomes increasingly optimistic about the company’s potential for growth in 2024. Despite experiencing four consecutive quarters of revenue declines, Apple has seen a 50% increase in its stock value this year, with a 0.5% rise on Friday. With a market value of $3.03 trillion, Apple currently surpasses Microsoft by approximately $250 billion in market capitalization. At its most recent closing price of $195.19, Apple is only 1% away from its previous all-time high of $196.45 on July 31.
The positive sentiment surrounding Apple prompted Morgan Stanley analyst Erik Woodring to raise his price target on the stock from $210 to $220. This adjustment suggests a potential 13% upside from the current levels and accompanies his reiteration of an Overweight rating on the stock. In a research note, Woodring expressed growing optimism by stating, “We are turning more positive on AAPL shares as near-term risks subside and attention shifts towards factors that could drive a recovery in fundamentals.” He highlights the excitement revolving around “edge AI,” services, and gross margin strength as catalysts for reigniting the bull case.
Woodring attributes the recent surge in Apple’s stock to three primary factors. The first is a preference for quality megacap stocks amid a period of heightened uncertainty. Additionally, he believes that the strength of Apple’s services and gross margins compensates for the well-known challenges faced by iPhone units in China. Lastly, Woodring predicts that Apple will play a significant role in artificial intelligence on both phones and laptops.
In terms of valuation, Woodring notes that Apple trades at 26 times his earnings per share estimate for the September 2025 fiscal year. This falls within the historical range of 18 to 32 times. The analyst also addresses various investor questions regarding Apple in his note, providing a comprehensive overview of his views.
As Apple gears up for a potential record-breaking achievement, Wall Street remains increasingly bullish on the company’s future prospects. With its strategic positioning in key areas such as AI and ongoing stability in its services and gross margins, Apple appears poised to continue its upward trajectory in the market. # Ongoing Concerns for Google and Apple
One area of concern in the tech industry is the U.S. Department of Justice’s lawsuit against Google. The focus of the lawsuit is on the billions of dollars that Google pays to Apple to be the default search engine on the iPhone and Safari web browser. Although arguments for the case have been completed, it is expected that the judge will not make a ruling until late 2024. The lengthy appeals process that follows could potentially extend the proceedings to 2026 or later.
Potential Changes for Google and Apple
According to industry expert Woodring, the most likely outcome of an adverse ruling would be structural changes to the agreement between Google and Apple. This could result in Apple still receiving variable payments for traffic but discontinue fixed payments. In a worst-case scenario, a ruling may require the elimination of all search-related payments. Such a ruling could potentially impact 18% of Apple’s estimated earnings for fiscal 2026.
Apple’s Position in AI
While Apple hasn’t revealed much about its plans for artificial intelligence (AI), Woodring believes that the company is well-positioned to benefit from its ability to lead in edge AI. The addition of new AI capabilities could increase Apple’s share of the hardware market and accelerate the replacement cycle. Woodring also anticipates positive effects on Apple’s services businesses, including the App Store. Furthermore, he suggests that Apple may introduce a premium AI-powered version of its Siri voice interface.
The Chinese Market
Regarding the Chinese market, Woodring notes a rise in consumers switching to Huawei phones. However, he believes that this trend is well understood by financial markets. Woodring projects that iPhone unit sales for fiscal 2024 will remain flat compared to the previous year, with a 24% decrease in China. Nevertheless, he emphasizes that there may be an underappreciated shift towards higher-priced units.
Outlook on the Vision Pro Mixed Reality Headset
Woodring predicts that initial sales of the Vision Pro mixed reality headset in 2024 will be modest. However, he sees long-term potential for the product. Success will depend on the emergence of new use cases and the launch of more affordable headsets in the future. The current price for the initial units is set at $3,499.
