apple ( AAPL ) stock could be due for a revaluation when the consumer electronics company comes out with its rumored AI-enabled iPhone this fall, a Wall Street analyst says.
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Hedge fund investors are starting to warm to Apple stock, despite the company’s near-term outlook, JPMorgan analyst Smek Chatterjee said in a client note Thursday.
Chatterjee said the recent drop in Apple shares is creating a more attractive valuation for the iPhone than a significant upgrade cycle.
“Investor’s growing appetite is largely driven by interest in participating in the cyclical upsides associated with an AI-on-device-led upgrade cycle, with investors taking cues from the 5G-led upgrade cycle,” he said. ” They said.
Chatterjee said the iPhone 16, due this fall, is likely to have AI features to attract buyers. This selling point could be similar to the move to 5G wireless networks, which began with the iPhone 12 in late 2020.
Apple stock price target lowered.
As of today, Apple stock has fallen nearly 11 percent. Chatterjee said the company is facing weak demand for hardware and slow pace of services.
Chatterjee maintained his overweight rating on Apple stock but cut his price target to 210 from 215.
In afternoon trading on the stock market today, Apple stock rose 2.5 percent to 172.02.
A re-rating of Apple stock will likely come before the actual AI iPhone launches, he said.
Chatterjee believes the big upgrade cycle for iPhones will actually come in late 2025 with the iPhone 17 series. By then, there will be broader use cases for on-device AI, he said.
Gross profit margin is undervalued.
Elsewhere on Wall Street, BofA Securities analyst Vamsi Mohan reiterated his buy rating on Apple stock with a price target of 225.
“In our opinion, Street underestimates the long-term gross margin potential for Apple in both products and services,” Mohan said in a client note. “We see gross margins at Apple significantly higher, driven by an increased mix of services across the overall portfolio.”
Follow Patrick Seitz at X, first on Twitter, at @IBD_PSeitz For more stories on consumer technology, software and semiconductor stocks.
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