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Apple Unveils AI-Powered iPhone 16: Buy, Hold or Sell AAPL Stock?
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Apple (AAPL - Free Report) unveiled the AI-powered iPhone 16 line-up of devices on Monday. The iPhone maker introduced Apple Watch Series 10, as well as AirPods 4 and AirPods Pro 2.
The new iPhone 16 and iPhone 16 Plus are powered by the new A18 chip, delivering better performance and efficiency, as well as a big boost in battery life. Both models feature Camera Control that includes a 48MP Fusion camera with a 2 times Telephoto option.
The premium iPhone 16 Pro and iPhone 16 Pro Max are powered by an A18 Pro chip. These devices feature a new 48MP Fusion camera with a faster quad-pixel sensor that enables 4K120 fps video recording in Dolby Vision.
The devices feature Apple Intelligence, which Apple unveiled at its annual developers’ event. It is an advanced personal intelligence system seamlessly integrated into iOS 18.1, iPadOS 18.1 and macOS Sequoia 15.1. It will be available from next month.
Apple Intelligence is expected to be a game changer for AAPL stock, driving iPhone sales. However, is that enough to attract investors?
Let’s analyze the role Apple Intelligence is expected to play in driving Apple’s prospects.
Will Apple Intelligence Aid AAPL Stock’s Prospects?
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.
Apple Intelligence will be first available in U.S. English and will be expanded quickly to include localized English in Australia, Canada, New Zealand, South Africa and the U.K. in December. Additional language support – Chinese, French, Japanese and Spanish will be available next year.
Siri, powered by Apple Intelligence, becomes 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.
The new writing tool helps users rewrite, proofread, and summarize text everywhere, including mail, notes, pages and third-party apps.
Photo features get enhancement as the Movie feature now allows users to create the movies they want to see by simply typing a description. The new Clean Up tool identifies and removes distracting objects in the background of a photo without altering the subject.
Apple has integrated ChatGPT into its platforms, allowing users to access its expertise directly within iOS 18, iPadOS 18 and macOS Sequoia.
AI Focus & Services to Aid AAPL’s Top-Line Growth
Apple has been playing catch-up in the AI space 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.
Although Apple’s business primarily runs around its flagship iPhone, the Services portfolio has emerged its strong growth driver. In the fiscal third quarter, Services revenues grew 14.1% year over year to $24.21 billion and accounted for 28.2% of sales.
Apple expects the September-end quarter’s (fourth-quarter fiscal 2024) revenues to grow at the same rate as the June-end quarter on a year-over-year basis. For the Services segment, Apple expects a double-digit growth rate, similar to the first three quarters of fiscal 2024.
Apple Shares Overvalued
The AAPL stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment.
AAPL Shares Trade at a Premium
Image Source: Zacks Investment Research
Apple is trading at a premium with a forward 12-month P/E of 29.43X compared with the sector’s 24.76X and higher than the median of 27.68X, reflecting a stretched valuation.
Apple Underperforms Sector
Image Source: Zacks Investment Research
Apple shares have returned 23.1% year to date, underperforming the Zacks Computer & Technology sector’s appreciation of 23.9%.
What Should Investors Do With AAPL Stock?
Apple’s AI push is attractive for growth-oriented investors. 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.
However, Apple’s sluggish China business has been a headache. Greater China sales decreased 6.5% year over year to $14.73 billion, accounting for 17.2% of total sales in the fiscal third quarter.
Image: Bigstock
Apple Unveils AI-Powered iPhone 16: Buy, Hold or Sell AAPL Stock?
Apple (AAPL - Free Report) unveiled the AI-powered iPhone 16 line-up of devices on Monday. The iPhone maker introduced Apple Watch Series 10, as well as AirPods 4 and AirPods Pro 2.
The new iPhone 16 and iPhone 16 Plus are powered by the new A18 chip, delivering better performance and efficiency, as well as a big boost in battery life. Both models feature Camera Control that includes a 48MP Fusion camera with a 2 times Telephoto option.
The premium iPhone 16 Pro and iPhone 16 Pro Max are powered by an A18 Pro chip. These devices feature a new 48MP Fusion camera with a faster quad-pixel sensor that enables 4K120 fps video recording in Dolby Vision.
The devices feature Apple Intelligence, which Apple unveiled at its annual developers’ event. It is an advanced personal intelligence system seamlessly integrated into iOS 18.1, iPadOS 18.1 and macOS Sequoia 15.1. It will be available from next month.
Apple Intelligence is expected to be a game changer for AAPL stock, driving iPhone sales. However, is that enough to attract investors?
Let’s analyze the role Apple Intelligence is expected to play in driving Apple’s prospects.
Apple Inc. Price and Consensus
Apple Inc. price-consensus-chart | Apple Inc. Quote
Will Apple Intelligence Aid AAPL Stock’s Prospects?
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.
Apple Intelligence will be first available in U.S. English and will be expanded quickly to include localized English in Australia, Canada, New Zealand, South Africa and the U.K. in December. Additional language support – Chinese, French, Japanese and Spanish will be available next year.
Siri, powered by Apple Intelligence, becomes 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.
The new writing tool helps users rewrite, proofread, and summarize text everywhere, including mail, notes, pages and third-party apps.
Photo features get enhancement as the Movie feature now allows users to create the movies they want to see by simply typing a description. The new Clean Up tool identifies and removes distracting objects in the background of a photo without altering the subject.
Apple has integrated ChatGPT into its platforms, allowing users to access its expertise directly within iOS 18, iPadOS 18 and macOS Sequoia.
AI Focus & Services to Aid AAPL’s Top-Line Growth
Apple has been playing catch-up in the AI space 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.
Although Apple’s business primarily runs around its flagship iPhone, the Services portfolio has emerged its strong growth driver. In the fiscal third quarter, Services revenues grew 14.1% year over year to $24.21 billion and accounted for 28.2% of sales.
Apple expects the September-end quarter’s (fourth-quarter fiscal 2024) revenues to grow at the same rate as the June-end quarter on a year-over-year basis. For the Services segment, Apple expects a double-digit growth rate, similar to the first three quarters of fiscal 2024.
Apple Shares Overvalued
The AAPL stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment.
AAPL Shares Trade at a Premium
Image Source: Zacks Investment Research
Apple is trading at a premium with a forward 12-month P/E of 29.43X compared with the sector’s 24.76X and higher than the median of 27.68X, reflecting a stretched valuation.
Apple Underperforms Sector
Image Source: Zacks Investment Research
Apple shares have returned 23.1% year to date, underperforming the Zacks Computer & Technology sector’s appreciation of 23.9%.
What Should Investors Do With AAPL Stock?
Apple’s AI push is attractive for growth-oriented investors. 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.
However, Apple’s sluggish China business has been a headache. Greater China sales decreased 6.5% year over year to $14.73 billion, accounting for 17.2% of total sales in the fiscal third quarter.
Apple currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.