Apple AAPL is gearing up for an exciting event on September 9, where it is anticipated to introduce the groundbreaking Apple Intelligence-powered iPhone 16 series along with details on the Apple Watch 10.
During its annual Worldwide Developers Conference (WWDC) on June 10, Apple launched Apple Intelligence, a cutting-edge personal intelligence system seamlessly woven into iOS 18, iPadOS 18, and macOS Sequoia.
The iPhone 16 and iPhone 16 Plus models are projected to utilize the A18 chip infused with 8GB to support Apple Intelligence. Meanwhile, the iPhone 16 Pro and iPhone 16 Pro Max are expected to run on the A18 Pro chip.
Revolutionizing with AI Technology
Apple’s entry into the AI realm, alongside tech giants like Alphabet GOOGL, Microsoft MSFT, and Amazon AMZN, has triggered a stir amongst investors. The launch of Apple Intelligence is poised to reshape the company’s competitive standing.
Since WWDC, Apple shares have surged by 18.6%, outperforming the Zacks Computer-Micro industry’s rise of 17.5% and the Computer & Technology sector’s return of 1.6%.
Yet, the burning question remains: will Apple’s stock rally persist post the unveiling of the Apple Intelligence-driven iPhone 16 series, or will it taper off?
Delving deeper is necessary to unveil what lies ahead for Apple investors.
Apple’s Dominance Post-WWDC
Leveraging the prowess of GenAI models, Apple Intelligence is designed to elevate user experience across iPhones, iPads, and Macs by fusing robust language and image comprehension with personal context. Backed by Apple silicon, this technology promises to streamline everyday tasks while upholding Apple’s rigorous privacy standards.
Siri, turbocharged by Apple Intelligence, is set to become more intuitive, context-aware, and adept at handling intricate operations. Users will be able to engage with Siri using both voice and text, with the assistant poised to retain context across multiple requests. The redesigned Siri will feature a stylish luminescent border when in use, providing support and detailed answers for device usage.
In a significant upgrade, Apple is integrating ChatGPT into its ecosystem, enabling direct access to ChatGPT’s functionalities within iOS 18, iPadOS 18, and macOS Sequoia. Siri will harness ChatGPT’s capabilities, with user consent, to deliver more precise and detailed information. ChatGPT will also be integrated into systemwide writing tools, enriching content creation with advanced language models and image generation.
The Services Segment: AAPL’s Key Driver
While Apple revolves primarily around its flagship iPhone, the Services division has emerged as the company’s significant growth engine. In the third fiscal quarter, Services revenue soared by 14.1% year over year to $24.21 billion, constituting 28.2% of the total sales.
The Services arm is fueled by the escalating demand for Apple TV+ content and the upsurge in Apple Pay adoption. The recent expansion of Tap to Pay on iPhone to additional markets like Japan, Canada, Italy, and Germany further boosts this segment.
Apple Inc. Price and Consensus
The Dilemma of Apple’s Valuation
The AAPL stock does not come cheap, as evidenced by a Value Score of F indicating a stretched valuation presently.
Trading at a premium with a forward P/E ratio of 30.59X compared to the sector’s 26.47X and exceeding the median of 27.64X, Apple’s stock reflects an inflated valuation.
Guidance for AAPL Investors
Apple’s foray into AI presents an attractive opportunity for growth-focused investors. The Services business has emerged as Apple’s cash cow, with an expanding content portfolio encompassing Apple TV+ and Apple Arcade. With a user base exceeding 2 billion active devices, Apple’s investment landscape appears appealing.
However, the sluggish business performance in China poses a challenge. Greater China sales dwindled by 6.5% year over year to $14.73 billion, constituting 17.2% of the total revenue in the third fiscal quarter.
Proceed with Caution
Currently sporting a Zacks Rank #3 (Hold), Apple signals prudence in awaiting a more opportune entry point into the stock. To discover more top-notch investment opportunities, it might be wise to explore the array of Zacks #1 Rank (Strong Buy) stocks.
