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The Cupertino-based tech giant Apple Inc. (AAPL) typically unveils its new flagship iPhone lineup every year in September, as part of a highly anticipated event that captivates millions of viewers worldwide. iPhone enthusiasts worldwide eagerly await each release, excited to see the latest advancements in Apple’s premium smartphones.
Since the original iPhone debuted in 2007, the iconic device has undergone 15 upgrades. However, faced with stiff competition, a lack of compelling new features, and regulatory hurdles in the world’s largest smartphone market, China, the company’s September 2023 iPhone 15 launch has struggled to live up to the high bar set by its predecessors.
Recent data from Consumer Intelligence Research Partners (CIRP) reveals a significant drop in the iPhone 15’s sales share, falling to 67% in the June quarter of fiscal 2024 compared to 79% for the iPhone 14 models in the same period last year. As the dominance of its flagship product wanes, Apple is banking on cutting-edge artificial intelligence (AI) features to reignite consumer interest and drive sales, much like how rivals Google and Samsung have leveraged AI into their latest smartphone models.
Following Apple’s much-awaited AI strategy announcement at the Worldwide Developers Conference (WWDC) event in early June, both investors’ and Wall Street’s confidence in the company's prospects have ratcheted higher. With the company’s AI-enabled iPhone 16 model expected to debut on Sept. 9 in an event titled “It’s Glowtime,” should investors take the opportunity to add AAPL stock to their portfolios now? Let’s take a closer look to find out.
About Apple Stock
Established in 1976, Apple Inc. (AAPL) has cemented its position as the undisputed leader in consumer tech innovation. Apple consistently sets the bar high with its iconic products like the iPhone, iPad, Mac, AirPods, Apple Watch, and Apple Vision Pro. This “Magnificent Seven” company’s unmatched ability to blend cutting-edge design with seamless functionality keeps it at the forefront of the tech world. With a staggering market cap of around $3.5 trillion, this tech giant claims the title of the world’s most valuable company.
After a slow start to 2024, shares of this mega-cap stock are now up 18% on a YTD basis and 27.2% over the past 52 weeks, roughly mirroring the broader S&P 500 Index’s ($SPX) corresponding gains.
Apple’s commitment to rewarding shareholders is evidenced by its decade-long streak of consistent dividend increases. But that’s not all; the tech giant made headlines in May with a record-breaking $110 billion share buyback, the largest ever in U.S. history.
In fiscal Q3 alone, Apple returned over $32 billion to shareholders, including $3.9 billion in dividends and a remarkable $26 billion in share repurchases. On Aug. 15, the company paid its shareholders a quarterly dividend of $0.25 per share. Its annualized dividend of $1.00 per share results in a modest 0.44% yield at current levels.
Priced at 33.53 times forward earnings, AAPL stock is valued in line with some of its mega-cap Magnificent Seven peers, such as Amazon.com (AMZN) and Microsoft (MSFT).
Apple’s Q3 Earnings Beat Wall Street Projections
Following the company’s fiscal Q3 earnings results after the close on Aug. 1, which blew past Wall Street’s forecast, shares of Apple managed to close slightly higher the next day, despite a broader sell-off. The company reported a 5% year-over-year revenue increase to $85.8 billion, beating estimates by a narrow margin. Additionally, EPS grew 11% to $1.40, exceeding projections by a 4.5% margin.
Apple’s iPad sales rose 24% to $7.2 billion, as the release of fresh iPad models during the quarter - the first since 2022 - sparked a flurry of upgrades and revitalized enthusiasm for the product line. On the other hand, despite a slight dip in year-over-year sales to $39.3 billion, the iPhone remains Apple’s cash cow, contributing a hefty 46% of the company’s total revenue for the quarter.
Apple’s Services business - which encompasses everything from hardware warranties and revenue from Alphabet’s Google (GOOGL) unit to cloud storage subscriptions and Apple TV+ content - raked in $24.2 billion in sales, marking a 14% annual jump and underscoring its pivotal role in driving Apple’s earnings base. The tech titan wrapped up the quarter with a robust cash position of $153 billion and a total debt of $101 billion.
While Apple doesn’t provide forward guidance, management indicated during the Q3 earnings call that they expect revenue growth to remain steady in Q4. Additionally, executives projected operating expenses to arrive between $14.2 billion and $14.4 billion, with gross margins anticipated to range from 45.5% to 46.5% for the current quarter.
Over the longer term, analysts tracking Apple project the company’s profit to reach $6.70 per share in fiscal 2024, representing a 9.3% jump from the previous year. This growth is expected to continue into fiscal 2025, with earnings anticipated to rise 12.7% to $7.55 per share.
What Do Analysts Expect For Apple Stock?
According to a recent analyst note from Wedbush Securities, the AI-powered launch of the iPhone 16 in September could ignite a major growth phase for Apple over the coming year. The investment firm projects initial shipments of the iPhone 16 to exceed a whopping 90 million units, surpassing the market’s initial expectations of 80-84 million units.
“We are seeing more indications across the Asia supply chain over the past few weeks this iPhone upgrade cycle could be a historical one, setting the stage for a super cycle as currently we estimate roughly 300 million iPhones global have not upgraded in over four years,” wrote analyst Dan Ives in a note to clients.
Ives, who expects a “very smooth transition” between outgoing CFO Luca Maestri and his internal replacement at Apple, added that “with Apple Intelligence on the doorstep in essence Cupertino will be the gatekeepers of the consumer AI revolution.”
The analyst has a $285 price target for AAPL, implying expected upside of about 25% and a market cap well over $4 trillion.
Overall, AAPL stock has a consensus “Moderate Buy” rating. Of the 31 analysts covering the stock, 19 advise a “Strong Buy,” three suggest a “Moderate Buy,” eight say it's a “Hold,” and one analyst advocates a “Strong Sell.”
The mean price target for AAPL is $241.68, indicating an upside potential of just 6% from current levels. However, the Street-high target price of $300, raised by Loop Capital last month, implies the stock could rally as much as 31.6% from here.
On the date of publication, Anushka Mukherji did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
