Apple will launch its new iPhones that include artificial intelligence features this autumn and investors would be smart to load up on Apple stock before that.
Analysts across Wall Street are forecasting a major upgrade cycle for the iPhone prompted by the addition of AI. This is important for Apple as the company derives half its revenue from global iPhone sales.
Apple stock has been on an upswing since mid-June when the company officially unveiled its AI strategy, rising 10% even with the market volatility and downturn in tech stocks over the past month.
Analysts see more upside ahead and are growing increasingly bullish after Apple delivered strong second-quarter financial results.
The bottom line is that now is a great time to buy Apple stock or add to an existing position before the share price runs higher.
AI Optimism and Apple Stock
The “Apple Intelligence” strategy unveiled by CEO Tim Cook in June is expected to usher in an upgrade super cycle for the iPhone and promises to bring the biggest changes to the smartphone since its launch back in 2007.
New AI features are expected to include a revamped Siri digital assistant and the addition of OpenAI’s ChatGPT technology. Cook said that, going forward, Siri will interact with messages, emails, calendars, as well as third party apps. Siri will also be able to write emails for iPhone users.
Apple and many of the analysts that follow the company believe that the new AI features will convince its more than one billion users to upgrade to the next generation of iPhones.
The new AI features will only be available on the latest iPhones, starting with the iPhone 15 Pro as well as future models, requiring consumers to upgrade to get the benefits.
The new AI features will be embedded in Apple’s newest operating system for the iPhone.
Analyst Dan Ives at Wedbush says the AI strategy could push Apple’s market capitalization to $4 trillion.
Strong Results
Beyond its AI strategy, Apple delivered Q2 financial results at the start of August that beat Wall Street forecasts, helped by accelerating sales of new iPad tablets.
The consumer electronics giant posted EPS of $1.40 versus $1.35 that was the consensus estimate among analysts. Revenue in what was the company’s fiscal third quarter totaled $85.78 billion.
That was ahead of forecasts that called for sales of $84.53 billion. Sales were up 5% from a year earlier.
All of Apple’s products and services categories topped Wall Street forecasts with the exception of the MacBook computer, where sales of $7.01 billion slightly missed the $7.02 billion that analysts had penciled in.
The strongest growth came from the iPad division, where sales grew nearly 24% year-over-year to $7.16 billion. Apple released new iPads this spring for the first time since 2022 and that led to a wave of upgrades among consumers.
The “services” business that includes warranties, cloud storage subscriptions, and subscriptions to Apple TV+ generated revenue of $24.21 billion, up 14% from the same period of 2023.
The company also spent $32 billion on dividend payments and stock buybacks during Q2 of this year.
While famed investor Warren Buffett has sold half his AAPL stock, he did so while selling many other stocks in his massive $450 billion portfolio. Apple continues to be Buffett’s biggest equity holding.
Buy Apple Stock
Apple stock is up nearly 20% in the last 12 months and has gained 325% over the past five years. Looking ahead, there are many reasons to remain bullish.
The biggest reason is the anticipated upgrade cycle for the iPhone that is expected to be initiated by new AI features.
Other reasons for optimism include strong iPad sales, rising revenue from the company’s services, and continued growth in the company’s share buybacks and dividend payments. Add it all up and Apple stock is a buy.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.
