J.P. Morgan Weighs in on Apple Stock as AI Comes Into the Spotlight

Apple (NASDAQ:AAPL) made its first serious foray into the AI game at the recent WWDC event, with the introduction of AI features that will be embedded across its ecosystem.

Apple has been an AI latecomer, lagging other tech giants in that respect but the long-awaited entry into the field requires a positive rethink around expectations for the upcoming iPhone releases, says J.P. Morgan analyst Samik Chatterjee.

“We are updating our volume forecasts for the iPhone 16 and iPhone 17 cycle following the WWDC event, which laid out a collection of AI features that in our view will drive an upgrade cycle that starts with the iPhone 16 launch (primarily FY25 impact to financials) followed by a cycle peak with the launch of iPhone 17 (primarily FY26 impact to financials),” the 5-star analyst said.

Given the upgrade cycle for AI-capable iPhones, Chatterjee now sees iPhone volumes reaching 250 million units in CY25 (244 million in FY25) and 275 million in CY26 (268 million in FY26).

Besides the positive momentum from the iPhone upgrade cycle, Chatterjee has also slightly increased his forecast regarding Services growth. This is down to expecting better monetization of Services through third-party AI applications in the years ahead.

As such, based on the heightened outlook for both iPhones and Services, Chatterjee has now raised his FY25E and FY26E adj. EPS estimates to $8.10 and $9.69, respectively, with both figures now meaningfully above the Street’s forecast of $7.26 and $7.64.

Although Chatterjee notes that on the back of WWDC, buy-side estimates are “clearly higher” than sell-side estimates (this is due to heightened investor expectations regarding an upgrade cycle featuring widespread AI-enabled capabilities across native apps), the analyst thinks there’s still “further upside to the shares.” Currently, shares are valued at approximately 22x Chatterjee’s FY26E forecast, whereas the analyst considers 25x to be a more suitable valuation.

“However,” Chatterjee goes on to add, “our updated model only incorporates AI led upsides to iPhone volumes, and we envision further potential upsides in the form of upgrades to the iPad and Mac devices from AI led capabilities.”

The result of all the above is a new price target for the stock. Chatterjee’s objective moves from $225 to $245, implying Apple shares have room for 14% growth over the next 12 months. (To watch Chatterjee’s track record, click here)

So, that’s J.P. Morgan’s view, what does the rest of the Street have in mind? The current outlook offers a conundrum. On the one hand, based on 23 Buy, 11 Holds, and just a single Sell, the stock has a Moderate Buy consensus rating. However, after soaring ~30% over the past two months, the analysts expect shares to stay rangebound for the time being. (See AAPL 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.