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Apple Hits 52-Week High: Can AI Focus Drive AAPL Stock Higher?
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Apple (AAPL - Free Report) shares hit a 52-week high of $220.38 on Jul 2 and finally closed at $220.27, up 14.4% year to date. Since Jun 10, when the iPhone maker hosted its annual developers’ event, the Worldwide Developers Conference (WWDC), Apple shares have jumped 14.1%, outperforming the Zacks Computer-Mini industry’s gain of 13.8% and the Zacks Computer & Technology sector’s return of 5.8%.
Lately, AAPL shares have been gaining attention from investors thanks to its AI push with the introduction of Apple Intelligence, an advanced personal intelligence system seamlessly integrated into iOS 18, iPadOS 18 and macOS Sequoia, at WWDC.
Apple has been playing catch-up in the AI space compared with Alphabet (GOOGL - Free Report) , Microsoft (MSFT - Free Report) and Amazon (AMZN - Free Report) , its peers in the “magnificent seven” group. Following the launch of Apple Intelligence, its competitive position is expected to improve.
AI Focus Aids AAPL’s Long-Term Prospects
Apple CEO Tim Cook has expressed his enthusiasm over the opportunities with Generative AI (GenAI). In the fiscal second-quarter earnings call, Cook stated that Apple enjoys a significant advantage in the AI space due to “Apple’s unique combination of seamless hardware, software and services integration, groundbreaking Apple’s silicon, with our industry-leading neural engines and our unwavering focus on privacy.”
Apple’s Performance Since WWDC
Image Source: Zacks Investment Research
Leveraging the power of GenAI models, Apple Intelligence aims to enhance user experience across iPhone, iPad, and Mac by combining robust language and image understanding with personal context. This technology, powered by Apple silicon, promises to simplify and accelerate everyday tasks while maintaining Apple’s stringent privacy standards.
Siri, powered by Apple Intelligence, has become more natural, contextually aware, and capable of handling complex tasks. Users can communicate with Siri using both voice and text, and the assistant can now maintain context across multiple requests. Siri’s new design features an elegant glowing light around the screen edge when active, and its functionality extends to providing device support and answering detailed questions about using the iPhone, iPad and Mac.
In a significant enhancement, Apple is integrating ChatGPT into its platforms, allowing users to access its expertise directly within iOS 18, iPadOS 18 and macOS Sequoia. Siri can utilize ChatGPT’s capabilities, with user consent, to provide more detailed and accurate information. ChatGPT will also be available in the systemwide Writing Tools, enhancing content creation with advanced language models and image generation.
Apple’s strong balance sheet and robust cash flow generating ability are noteworthy. As of Mar 30, 2024, cash & marketable securities were $162.34 billion compared with term debt of $102.59 billion.
Apple returned nearly $27 billion in the second quarter of fiscal 2024 through dividend payouts ($3.7 billion) and share repurchases ($23.5 billion). Its board authorized an additional $110 billion for share repurchases and also raised dividend payout by 4% to 25 cents per share.
Stiff Competition, China Worries Hurt AAPL’s Near-Term
China’s growth remains a worry for Apple due to stiff competition from local smartphone makers, including Huawei. The Chinese government’s directive to state officials not to use non-Chinese phones for work has been detrimental to the iPhone’s demand.
Per Canalys data, the Mainland China smartphone market witnessed 67.7 million units of shipment in first-quarter 2024. Huawei led with a 17% market share, shipping 11.7 million smartphones, while Apple sold 10 million units, down 25% year over year, the most among the top five vendors.
The issues forced Apple to cut retail prices, which drove iPhone smartphone shipments in April (up 52% year over year) and is also expected to have benefited May sales. However, Apple is suffering from a lack of GenAI capabilities in the iPhone.
Conclusion
Apple’s near-term prospects remain foggy due to sluggish China sales amid stiff competition. It expects the June quarter’s (third-quarter fiscal 2024) revenues to grow low-single-digit year over year. Unfavorable forex is expected to hurt revenues by 2.5%.
The Zacks Consensus Estimate for revenues is currently pegged at $83.75 billion, indicating 2.38% year-over-year growth. The consensus mark for earnings has increased by a penny to $1.33 per share over the past 30 days.
Positive Estimate Revision
Image Source: Zacks Investment Research
Moreover, Apple is trading at a premium with a forward 12-month P/E of 30.63X compared with the Zacks Computer-Mini industry’s 28.58X and higher than the median of 27.37X, reflecting a stretched valuation.
However, Apple’s AI push is hard to ignore. The Services business has emerged as AAPL’s new cash cow with an expanding content portfolio for Apple TV+ and Apple Arcade. An expanding user base of more than 2 billion active devices makes Apple’s investment profile attractive.
Moreover, Apple shares are trading above the 50-day moving average, indicating a bullish trend.
Image: Bigstock
Apple Hits 52-Week High: Can AI Focus Drive AAPL Stock Higher?
Apple (AAPL - Free Report) shares hit a 52-week high of $220.38 on Jul 2 and finally closed at $220.27, up 14.4% year to date. Since Jun 10, when the iPhone maker hosted its annual developers’ event, the Worldwide Developers Conference (WWDC), Apple shares have jumped 14.1%, outperforming the Zacks Computer-Mini industry’s gain of 13.8% and the Zacks Computer & Technology sector’s return of 5.8%.
Lately, AAPL shares have been gaining attention from investors thanks to its AI push with the introduction of Apple Intelligence, an advanced personal intelligence system seamlessly integrated into iOS 18, iPadOS 18 and macOS Sequoia, at WWDC.
Apple has been playing catch-up in the AI space compared with Alphabet (GOOGL - Free Report) , Microsoft (MSFT - Free Report) and Amazon (AMZN - Free Report) , its peers in the “magnificent seven” group. Following the launch of Apple Intelligence, its competitive position is expected to improve.
AI Focus Aids AAPL’s Long-Term Prospects
Apple CEO Tim Cook has expressed his enthusiasm over the opportunities with Generative AI (GenAI). In the fiscal second-quarter earnings call, Cook stated that Apple enjoys a significant advantage in the AI space due to “Apple’s unique combination of seamless hardware, software and services integration, groundbreaking Apple’s silicon, with our industry-leading neural engines and our unwavering focus on privacy.”
Apple’s Performance Since WWDC
Image Source: Zacks Investment Research
Leveraging the power of GenAI models, Apple Intelligence aims to enhance user experience across iPhone, iPad, and Mac by combining robust language and image understanding with personal context. This technology, powered by Apple silicon, promises to simplify and accelerate everyday tasks while maintaining Apple’s stringent privacy standards.
Siri, powered by Apple Intelligence, has become more natural, contextually aware, and capable of handling complex tasks. Users can communicate with Siri using both voice and text, and the assistant can now maintain context across multiple requests. Siri’s new design features an elegant glowing light around the screen edge when active, and its functionality extends to providing device support and answering detailed questions about using the iPhone, iPad and Mac.
In a significant enhancement, Apple is integrating ChatGPT into its platforms, allowing users to access its expertise directly within iOS 18, iPadOS 18 and macOS Sequoia. Siri can utilize ChatGPT’s capabilities, with user consent, to provide more detailed and accurate information. ChatGPT will also be available in the systemwide Writing Tools, enhancing content creation with advanced language models and image generation.
Solid Liquidity Supports AAPL’s Shareholder-Friendly Initiative
Apple’s strong balance sheet and robust cash flow generating ability are noteworthy. As of Mar 30, 2024, cash & marketable securities were $162.34 billion compared with term debt of $102.59 billion.
Apple returned nearly $27 billion in the second quarter of fiscal 2024 through dividend payouts ($3.7 billion) and share repurchases ($23.5 billion). Its board authorized an additional $110 billion for share repurchases and also raised dividend payout by 4% to 25 cents per share.
Stiff Competition, China Worries Hurt AAPL’s Near-Term
China’s growth remains a worry for Apple due to stiff competition from local smartphone makers, including Huawei. The Chinese government’s directive to state officials not to use non-Chinese phones for work has been detrimental to the iPhone’s demand.
Per Canalys data, the Mainland China smartphone market witnessed 67.7 million units of shipment in first-quarter 2024. Huawei led with a 17% market share, shipping 11.7 million smartphones, while Apple sold 10 million units, down 25% year over year, the most among the top five vendors.
The issues forced Apple to cut retail prices, which drove iPhone smartphone shipments in April (up 52% year over year) and is also expected to have benefited May sales. However, Apple is suffering from a lack of GenAI capabilities in the iPhone.
Conclusion
Apple’s near-term prospects remain foggy due to sluggish China sales amid stiff competition. It expects the June quarter’s (third-quarter fiscal 2024) revenues to grow low-single-digit year over year. Unfavorable forex is expected to hurt revenues by 2.5%.
The Zacks Consensus Estimate for revenues is currently pegged at $83.75 billion, indicating 2.38% year-over-year growth. The consensus mark for earnings has increased by a penny to $1.33 per share over the past 30 days.
Positive Estimate Revision
Image Source: Zacks Investment Research
Moreover, Apple is trading at a premium with a forward 12-month P/E of 30.63X compared with the Zacks Computer-Mini industry’s 28.58X and higher than the median of 27.37X, reflecting a stretched valuation.
However, Apple’s AI push is hard to ignore. The Services business has emerged as AAPL’s new cash cow with an expanding content portfolio for Apple TV+ and Apple Arcade. An expanding user base of more than 2 billion active devices makes Apple’s investment profile attractive.
Moreover, Apple shares are trading above the 50-day moving average, indicating a bullish trend.
Apple Shares Trade Above 50-Day Moving Average
Image Source: Zacks Investment Research
Apple currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.