JP Morgan weighs in on Apple stock as AI moves into the spotlight

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Apple (NASDAQ:AAPL) The recent WWDC event took its first serious step into the AI ​​game, with the introduction of AI features that will be embedded into its ecosystem.

JP Morgan analyst Smek Chatterjee says Apple has been an AI latecomer, lagging behind other tech giants in this regard, but is bullish on expectations for the long-awaited iPhone release in the sector. A second is needed.

“We're updating our volume forecast for the iPhone 16 and iPhone 17 cycles after the WWDC event, which introduced a set of AI features that we believe will be an upgrade cycle. , which begins with the launch of iPhone 16 (mainly FY25 impact) followed by the peak of the cycle with the launch of iPhone 17 (mainly FY26 impact),” 5 Star analyst said.

Looking at the upgrade cycle for AI-enabled iPhones, Chatterjee now sees iPhone volumes at 250 million units in CY25 (244 million in FY25) and 275 million in CY26 (268 million in FY26).

In addition to the positive momentum from the iPhone upgrade cycle, Chatterjee also raised his forecast for services growth slightly. This is to expect better monetization of services through third-party AI applications in the coming years.

Thus, Chatterjee has now raised its FY25E and FY26E estimates, based on the elevated view for both iPhones and services. EPS estimates are $8.10 and $9.69, respectively, both figures now above Street forecasts of $7.26 and $7.64.

Although Chatterjee notes that on the back of WWDC, buy-side estimates are “significantly higher” than sell-side estimates (this is due to an upgrade cycle featuring extensive AI-powered capabilities in native apps). is due to rising expectations of cars), the analyst believes. There is still “further growth in shares”. Currently, the shares are valued at around 22x Chatterjee's FY26E forecast, while analysts consider 25x a more reasonable valuation.

“However,” Chatterjee added, “our updated model only incorporates AI-led upsides in iPhone volumes, and we envision further potential improvements in the form of upgrades to iPad and Mac devices with AI-led capabilities.” do.”

All of the above results in a new price target for the stock. Chatterjee's price target rises to $245 from $225, indicating that Apple shares have room for a 14% upside over the next 12 months. (To see Chatterjee's track record, click here)

So, that's JP Morgan's view, what does the rest of the Street have in mind? The current approach presents a conundrum. On the one hand, based on 23 buys, 11 holds, and just one sell, the stock has a moderate buy rating. However, after gaining ~30% in the past two months, analysts expect the shares to remain range-bound for now. (See AAPL Stock Forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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