The September keynote event by Cupertino-based Apple Inc. (AAPL) stands as an annual tech extravaganza, drawing in Apple aficionados worldwide. This event often showcases the latest iterations in the iPhone series, stirring the enthusiasm of tech enthusiasts. Apple’s iconic iPhone series, since its inception in 2007, has seen 15 transformations. However, as the competition stiffens, and innovation faces hurdles, the launch of iPhone 15 in September 2023 has grappled with high expectations set by its predecessors.
Recent data from Consumer Intelligence Research Partners (CIRP) highlights a significant decline in the sales share of iPhone 15, dropping to 67% in the June quarter of fiscal 2024 from 79% for the iPhone 14 in the same period a year ago. To counter this, Apple is placing its bets on cutting-edge artificial intelligence (AI) features to pique consumer interest, following the strategies of rivals like Google and Samsung. The tech giant unveiled its anticipated AI strategy at the Worldwide Developers Conference (WWDC), which led to increased confidence among investors and Wall Street analysts.
Apple’s Remarkable Stance
Established in 1976, Apple Inc. (AAPL) has etched its name as a pioneer in consumer technology innovation. With a plethora of iconic products such as the iPhone, iPad, Mac, AirPods, Apple Watch, and Apple Vision Pro, Apple’s design marvels paired with seamless functionality have placed it at the forefront of the tech industry. Boasting a market cap of approximately $3.5 trillion, Apple reigns as the world’s most valuable company.
After a sluggish start in 2024, AAPL shares have rallied, marking an 18% rise year-to-date and a 27.2% surge over the past 52 weeks, mirroring the gains seen in the expansive S&P 500 Index.
Apple’s commitment to rewarding its shareholders is exemplified by a decade-long streak of increasing dividends. In a monumental move, Apple initiated a $110 billion share buyback in May, marking the largest in U.S. history.
Additionally, in fiscal Q3, Apple showered shareholders with over $32 billion, comprising $3.9 billion in dividends and an astounding $26 billion in share buybacks. The tech giant paid out a quarterly dividend of $0.25 per share on August 15, translating to an annualized dividend of $1.00 per share, offering a modest 0.44% yield at current levels.
Apple’s Fiscal Fortitude
Boasting a forward earnings multiple of 33.53, AAPL stock is priced in line with its mega-cap counterparts like Amazon.com (AMZN) and Microsoft (MSFT).
Subsequent to Apple’s fiscal Q3 earnings revelation on August 1, which surpassed Wall Street estimates, the company witnessed a marginal uptick in stock despite a broader market downturn. Apple reported a 5% year-over-year revenue growth to $85.8 billion, edging past estimates. Furthermore, EPS surged by 11% to $1.40, outperforming projections by 4.5%.
While iPad sales surged by 24% to $7.2 billion, iPhone sales, contributing a significant 46% of total revenue, saw a slight dip year-over-year to $39.3 billion. Apple’s Services business, including revenue from Alphabet’s Google, recorded $24.2 billion in sales, depicting a 14% annual increase and underscoring its pivotal role in Apple’s revenue generation. Apple concluded the quarter with a robust cash position of $153 billion and total debt of $101 billion.
Although Apple refrains from providing forward guidance, management hinted during the Q3 earnings call about anticipating steady revenue growth in Q4. Operating expenses are projected to range from $14.2 billion to $14.4 billion, with gross margins anticipated between 45.5% and 46.5% for the current quarter.
Analysts foresee Apple’s profit climbing to $6.70 per share in fiscal 2024, reflecting a 9.3% increase from the previous year. The projected growth is expected to extend into fiscal 2025, with earnings forecasted to escalate by 12.7% to $7.55 per share.
Eyeing Apple’s Trajectory
Apple’s iPhone 16 Launch Sparks Investor Excitement
Analyst Projections and Market Expectations
A recent report from Wedbush Securities suggests that the upcoming AI-powered release of the iPhone 16 in September has the potential to trigger a significant growth phase for Apple in the coming year. Initial estimates predict that shipments of the iPhone 16 could surpass 90 million units, exceeding the market’s earlier expectations of 80-84 million units.
Analyst Insights and Forecasts
According to analyst Dan Ives, who commented on the potential success of the iPhone 16, there are signs in the Asia supply chain indicating that this particular iPhone upgrade cycle could be one for the history books. Ives noted that approximately 300 million iPhones globally have not been upgraded in over four years, setting the stage for what he calls a “super cycle” for Apple.
With the imminent introduction of Apple Intelligence, Ives believes that Cupertino will play a crucial role as gatekeepers in the consumer AI revolution.
Financial Projections and Stock Performance
Wedbush Securities has set a $285 price target for AAPL, suggesting an expected upside potential of around 25% and a market capitalization exceeding $4 trillion.
Currently, AAPL stock holds a consensus rating of “Moderate Buy” among analysts. Out of the 31 analysts covering the stock, 19 recommend a “Strong Buy,” three suggest a “Moderate Buy,” eight advise to “Hold,” and one analyst indicates a “Strong Sell.”
The mean price target for AAPL stands at $241.68, indicating a potential upside of 6% from current levels. However, the highest target price of $300, recently raised by Loop Capital, implies a remarkable rally of up to 31.6% from the current price.
