Apple (NASDAQ:AAPL) is primed to make the most of the opportunity afforded by the introduction of AI-enabled iPhones, and investors have been warming to the idea of a strong upgrade cycle ahead.
That said, it looks like for the time being Apple has decided not to pursue that opportunity in one part of the world. Last Friday, the tech giant announced it will delay rolling out the AI features in the European Union (EU) given worries around the region’s tech industry regulations.
Apple might have wanted to think about that valid concern earlier, as on Monday, EU antitrust regulators accused the company of violating its technology regulations, a charge that may lead to a substantial fine for the iPhone manufacturer. Apple is also under scrutiny in another investigation concerning newly imposed fees on app developers.
Looking at the situation, J.P. Morgan’s Samik Chatterjee, who ranks in the top 4% of Wall Street stock pros, thinks the delay might put a dent in the high expectations around this upgrade cycle. However, while Apple and the EU regulators work on the issue, which could take a while to resolve, Chatterjee does not see it having a “significant impact to the upgrade cycle.”
“We expect Year 1 of an anticipated 2-year stair-step volume ramp to be relatively unaffected by the dynamics in the EU market, and expect that there is ample time to resolve the challenges in FY25 before it can impact the forecasts relative to Year-2 of the upgrade cycle in FY26,” said the 5-star analyst.
Chatterjee’s optimistic view is based on the fact Western Europe (ex UK) only represents around 14% of total iPhone volumes, with the analyst expecting North America to be the “primary contributor in the AI upgrade cycle followed by China.”
Additionally, rather than a 1-year “Super-cycle” followed by stabilization as seen in the 5G launch, the analyst thinks a “2-year stair-step ramp” is expected this time around. This will feature a gradual increase in volume over two years, with an expected initial increase of 22 million units in the first year, followed by a further increase of 24 million units in year 2.
Bottom line, Chatterjee rates Apple shares an Overweight (i.e., Buy), along with a $245 price target, implying share appreciation of ~15% for the coming year. (To watch Chatterjee’s track record, click here)
On Wall Street, 23 analysts agree with Chatterjee’s positive outlook on Apple stock. Additionally, 10 analysts suggest a Hold (i.e., Neutral) rating, while only one recommends selling the stock. However, with the average price target at $217.19, shares appear to be almost fully valued right now. (See Apple stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
