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Apple (AAPL) finally launched its artificial intelligence (AI)-enabled iPhone 16 earlier this week. AAPL stock closed lower on Monday as the company unveiled the widely-awaited product, which was not necessarily surprising, as AAPL has historically underperformed markets on the day it launches new iPhones
That does not necessarily mean that the products aren't good; it's more so that the announcements are largely baked into prices in advance, and usually Apple does not have incrementally positive announcements to make on the launch day. In this article, we’ll look at Apple’s Q4 forecast, and analyze whether the iPhone 16 could take AAPL stock to new highs.
Apple iPhone 16 Launch
One of the biggest dampeners during the Apple iPhone 16 launch event was the revelation that the company's flagship “Apple Intelligence” wouldn’t be available at launch, and the features will be available only sometime next month. The company will then subsequently add to these features.
Apple Intelligence will initially be launched in U.S. English and expand to localized English in December. Support for non-English languages will only be available in 2025. Importantly, Apple Intelligence won’t be available in China and Europe for now, due to regulatory issues.
There was one surprise announcement at the event, though, and the new AirPods will now double as a hearing aid. The tech giant has long been eyeing the healthcare industry, and as far back as 2019, Tim Cook said that improving people’s health would be "Apple’s greatest contribution to mankind.”
Analysts Were Somewhat Underwhelmed by the iPhone 16
Post-launch, Wall Street analysts were somewhat underwhelmed by the iPhone 16 – especially the lack of a clear timeline for the Apple Intelligence rollout.
Needham analyst Laura Martin doubts the narrative that the iPhone 16 will fuel a massive replacement cycle, and said, "I just think there’s no compelling reason that somebody should run out and buy a new iPhone 16.” Martin instead believes that buyers should wait for the iPhone 17, as it will “have cooler stuff and there will be more gen. AI capability."
JPMorgan analyst Samik Chatterjee, who is otherwise bullish on AAPL, found the AI details “blurry.”
However, Wedbush analyst Dan Ives believes the iPhone 16 will be the "most successful iPhone unit launch in its history” and raised his Apple target price to match the Street-high of $300, which would imply the company’s market cap topping $4 trillion. Ives said, “We believe the careful rollout of Apple Intelligence features over the next 6-9 months is the right strategy to catalyze a major upgrade opportunity within Apple's installed base.”
AAPL Stock Forecast
Apple currently has a “Moderate Buy” rating from 31 analysts covering the stock. Its mean target price is $246.61, which is 10.7% higher than yesterday’s closing prices.
Apple has had a love-hate relationship with sell-side analysts this year. Three brokerages downgraded AAPL stock in the first two weeks of January alone, which was quite a rarity for the company. Since then, however, analyst sentiment has slowly turned around, particularly after the Worldwide Developer Conference (WWDC) in June, where Apple unveiled its AI initiatives.
Can Apple Stock Rise to New Records in Q4?
Apple stock peaked in mid-July, and has since failed to reclaim those highs. Markets now await the iPhone 16 pre-order and early sales data for insights into the traction the model is gaining. The next key data point will be Apple's fiscal Q4 earnings, which should provide real insights into how the iPhone 16 fared in the initial couple of weeks.
There are concerns over Apple’s valuations, especially as Warren Buffett has been selling the company’s shares, and trimmed his stake by nearly half in Q2. Apple’s next-12-month (NTM) price-to-earnings (P/E) multiple is currently at 30.8x, which is significantly higher than the 26.6x that it has averaged over the last five years. However, I don’t find the valuations too demanding, even as they are not cheap, either.
Overall, the risk-reward looks quite balanced at these levels, and the upside will now depend on whether the iPhone 16 lifts Apple's sales, which have otherwise sagged. If sales of the new model fail to live up to expectations, we could see some weakness in AAPL stock in Q4. On the other hand, if the model sparks a replacement cycle, as bulls believe, Apple stock might soar to new highs in the coming months.
On the date of publication, Mohit Oberoi had a position in: AAPL . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
