The high expectations placed on industry leaders can sometimes serve as a double-edged sword, as hopes for growth are often already factored into stock prices.
Powered by great AI expectations and a potential rebound in China iPhone sales, Apple (AAPL) has enjoyed a healthy dose of growth of late. Shares are up over 33% in the past three months, far outpacing the 8% growth of the S&P 500.
Will the stock continue to gather momentum, especially with Apple Intelligence updates that will become available with the iPhone 15 Pro and Pro Max this fall?
Probably not, says Piper Sandler analyst Matt Farrell, who feels that a “lot of good news is already priced into the stock.”
Though Apple’s personalized AI offering could turn out to be a “needle mover” on the upgrade front, considering the base case, Farrell does not think the scene is currently set for an upgrade “super cycle.”
Beyond an overall hesitancy when it comes to consumer use-cases for AI, Farrell is also worried about a slowdown in consumer spending, arguing that the “cumulative impact of inflation” is starting to take its toll. And that in turn could “potentially dampen Apple Intelligence excitement with the upgrade cycle.”
And where there are positives, they aren’t enough to justify buying in right now. As a case in point, Farrell highlights recent news that suggests an increase of iPhone 16 orders from TSMC: between 90-100 million compared to 80-90 million last year. While Farrell concedes it is “encouraging to see the positive data points,” the analyst thinks that at this point the “initial excitement is built into the stock.”
For now, then, Farrell is reiterating a Neutral rating, although he does boost the price target to $225 from $190. However, the new objective still suggests the stock is overvalued by 3.5%. As for moving forward, the analyst might become more bullish once there is either “1) more line of sight to a ‘super cycle’ or 2) a pull-back in the stock.” (To watch Farrell’s track record, click here)
The view from other analysts on Wall Street is a bit mixed. The 35 ratings from the past 3 months break down into 24 Buys, 10 Holds, and 1 Sell, making the consensus view a Moderate Buy. That said, the average price target of $222.64 represents a decline of 4.5% from current levels. It will be interesting to see whether analysts readjust their models shortly. (See AAPL stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
