There was a lot of excitement and high hopes for Apple (NASDAQ:AAPL) as it strolled into its annual worldwide developers conference (WWDC) this year. Undoubtedly, WWDC was supposedly the most important event of the year for the Cupertino-based tech titan. Despite the initial disappointment as visualized in AAPL stock, which fell 2% yesterday, I still think the stock is attractive for long-term investors willing to give Apple a chance to build upon the strong AI foundation it’s laying out for developers this week.
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In traditional Apple fashion, Tim Cook and company left the best (the reveal of its AI offering called Apple Intelligence) of the WWDC event for last. This, unfortunately, caused shares of AAPL to sink to their lowest point of the day before more than recovering today.
WWDC 2024: Apple Stock Doesn’t Quite Steal the Show
Do you remember the last time an Apple event actually moved AAPL stock higher initially? Neither do I. Perhaps Apple’s keynote team needs to spruce things up by letting Siri present her own new features or allowing the great Sam Altman to take the stage for a moment. Either way, I wouldn’t dismiss Apple’s lack of putting on a needle-moving show as a reason to shy away from the stock, even as many less-than-bullish talking heads express their lack of enthusiasm about the event and the path forward.
Further, some bears may double down on their concern that Apple is still falling behind in the AI race, even with the AI-packed punch of WWDC 2024. Despite the negativity, there were underrated developments from WWDC that may pave the way for upside in the coming 18 months.
The WWDC event saw a great deal of new AI features embedded across iOS, macOS, and even visionOS for the new Vision Pro (normal images converted to spatial images via AI). On the whole, though, the event really didn’t include anything that wasn’t already known via reports and rumors before the event kicked off.
The stock’s initial negative reaction wasn’t so much about a lack of AI features as much as it was about a lack of anything surprising that stood to “break new ground,” a phrase Tim Cook previously used at a prior conference call to describe Apple’s AI ambitions.
Arguably, the OpenAI partnership to bring ChatGPT to the Apple ecosystem was the biggest announcement of WWDC’s opening keynote. That said, many investors and traders saw the collaboration coming from a mile away.
Heck, it was common knowledge that Apple was teaming up with OpenAI in the weeks leading up to WWDC, and the stock had already reacted by rallying to almost $197 per share, just shy of all-time highs. Simply put, the main attraction of the day was already well baked into the stock in the morning before WWDC began.
Though the company delivered us a big dose of AI (Apple Intelligence as opposed to artificial intelligence) along with a wide range of impressive new innovations on the software side, AAPL stock seemed to only gravitate lower the further we moved through the event. The crowd was tough, perhaps too tough, especially given the distinct advantages Apple confirmed in the latter half of the keynote.
Specifically, Apple’s privacy and personalization advantages, I believe, are being severely discounted by investors and some analysts.
Apple’s Edge in the AI Race
Apple has been all about privacy when it comes to its products and services well before ChatGPT kicked off the AI boom. The strong privacy stance seemed mostly like good marketing in the earlier days when privacy concerns surrounded Meta Platforms (NASDAQ:META). In the age of AI, though, such a privacy-first focus, I believe, puts Apple at or around the top when it comes to consumer-facing AI. In an era of AI model commoditization, standing out with an edge is key to winning the AI race.
Though AI-savvy rivals, like Meta, may have more impressive AI chops than Apple right now, I’m not so sure Meta can convince us it has user privacy at the forefront. Even if Meta can convince us to trust it with our most intimate data, Apple is already in the pockets and on the desktops of well over a billion users. These users trust Apple enough with a slew of data they wouldn’t dare enter into the prompt of just any chatbot.
When it comes to AI, privacy and personalization go hand-in-hand. While Apple’s rivals may have fancier language or diffusion models (for text and image generators, respectively), Apple seems to have the infrastructure in place to allow users to harness the power of AI without putting their data at risk.
Indeed, the OpenAI ChatGPT partnership may be the biggest move for Apple into AI to date. However, I’d argue that Apple’s privacy-focused infrastructure is an even more significant advancement, one that I believe puts Apple ahead of the pack in AI. Sure, such a statement may seem outlandish today, but would you trust just any company with your personal photos, calendar, notes, messages, web history, and more? Probably not.
In a few years, I view Apple Intelligence as setting the new standard for personalized AI, with models running safely and swiftly on devices. If more firepower is needed to undertake a query, a secure encrypted connection to Apple’s private cloud infrastructure will be established transparently via Private Cloud Compute.
AAPL Stock: Still Too Cheap Given Given Stage Set for an iPhone Upgrade Cycle
If you’re like me and think Apple is setting a new standard on AI, the stock’s current 31.9 times trailing price-to-earnings (P/E) multiple is still too low. Sure, it’s on the high side of the historical range, with AAPL stock averaging a 24.9 times trailing P/E in the past five years.
However, when was the last time Apple gave its unique take on a profound and revolutionary industry on AI? Doubt Apple’s take on AI, if you will, but I think it was everything in place to win over consumers with its privacy focus and massive advantage in personalized AI.
Also, dismiss AAPL stock for the 10% drop in iPhone revenues in Q2 2024, if you will. Still, my bet is that an iPhone supercycle could be on the way after consumers have a chance to try Apple Intelligence for themselves later this year once iOS 18 launches.
Is AAPL Stock a Buy, According to Analysts?
On TipRanks, AAPL stock comes in as a Moderate Buy. Out of 34 analyst ratings, there are 23 Buys, 10 Holds, and one Sell recommendation. The average AAPL stock price target is $208.35, implying upside potential of 1.7%. Analyst price targets range from a low of $164.00 per share to a high of $275.00 per share.
The Takeaway
AAPL stock still seems attractive for investors willing to give the firm a few years to keep adding to what I believe is a profoundly strong AI foundation. With a privacy-first edge and cloud services to power its AI models of the future, I see Apple not just catching up in the AI race but taking steps to pull ahead of most other rivals. Additionally, Apple is setting a new standard for how consumer-facing AI models run.
Who knows? Perhaps we’ll all refer to AI as Apple Intelligence in 10-15 years.
