Top line
Apple posted its highest share price this year thanks to Wall Street fanfare about the Silicon Valley titan’s AI potential ahead of next week’s Worldwide Developers Conference, as investors eagerly await what some are describing as the next big event that lead to a decline in iPhone sales.
Apple CEO Tim Cook
Key facts
Apple shares rose as much as 1% to $196.42 in Wednesday trading, marking their highest share price since mid-December and passing the $3 trillion market capitalization mark for the first time since January (the gap was due to the buyback of Apple shares for billions of dollars ).
Apple has now officially reversed its 15% decline from January to April, as the market sold Apple shares and bought others seen as more advanced AI bets.
JPMorgan analyst Samik Chatterjee, who was among analysts touting Apple’s annual event in notes to clients this week and thus boosting the stock price, said the conference starting on Monday would “highlight whether Apple successfully has caught up with the rest of the industry despite a perceived slowdown in AI investment.”
Chatterjee said he expects the WWDC event to “successfully catalyze an upgrade cycle” for the iPhone, a much-needed tailwind for Apple as iPhone sales are expected to be the weakest since 2020 in the current quarter, according to consensus analyst estimates , compiled by FactSet.
Chatterjee added that he expects the upgrade cycle, in which about 1.5 billion iPhone users trade in their existing smartphones for the latest model, to begin this year before accelerating in 2025 as macroeconomic conditions are likely to improve and consumers are becoming more and more hungry for smartphones with artificial intelligence.
The biggest “watch point” at WWDC will be whether Apple reveals it will be ready to release generative AI in iPhone-specific apps like Siri and iMessage by September, according to Chatterjee.
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Decisive quote
If WWDC affects Apple stock given the AI hype. “Historically, WWDC has not been a significant catalyst for Apple stock … we think this year is different as Apple officially enters the Gen AI race,” predicted Morgan Stanley analysts led by Eric Woodring.
What to watch out for
If WWDC affects Apple stock given the AI hype. “Historically, WWDC has not been a significant catalyst for Apple stock … we think this year is different as Apple officially enters the Gen AI race,” predicted Morgan Stanley analysts led by Eric Woodring.
Key background
The past year has been an unusually great time for Apple investors, as the stock’s 7% return is worse than the S&P 500’s 25% return and rival Microsoft’s 23% return. Microsoft, which overtook Apple as the world’s most valuable company earlier this year, more tangibly translated intense interest in AI into earnings growth than Apple, with its first-quarter net income 20% higher than the same period in 2023, much better than Apple’s -2% bottom line growth. Apple has been fairly quiet about discussing its AI offerings to the public, although its CEO Tim Cook said in February that the company has put “an enormous amount of time and effort” into generative AI. Aside from the jitters over Apple’s unclear path to monetizing AI, the biggest point of frustration for investors is the decline in its key business in China, with sales in the region expected to be 7% lower than a record $74.2 billion for 2022, according to FactSet.
More information
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