Apple's AI-Powered iPhone 16 Unveiling: Analysts Cautiously Optimistic Amid Mixed Sentiment
2min read As of last week, Apple Inc. (AAPL) dropped by 0.70%. Over the past week, the stock declined 3.9%, although it has risen by 15.14% year-to-date. The company's latest market capitalization stands at $3.357.378 trillion. Analysts' sentiment toward Apple's stock appears mixed, with some caution over the near-term implications of its upcoming product releases.
Apple's highly anticipated fall product launch event is set for September 10, 1 AM Beijing time. The tech giant is expected to unveil the iPhone 16 series, which reportedly will feature the A18 chip built on Softbank's Arm's latest V9 architecture, pushing AI capabilities into smartphones. Apple's devices, including iPhone, iPad, and Mac, use Arm's technology for their custom chips.
The upcoming launch is expected to be one of Apple's largest in recent years, featuring four models: iPhone 16, iPhone 16 Plus, iPhone 16 Pro, and iPhone 16 Pro Max. The event may also see the introduction of Apple Watch Series 10 and possibly the AirPods 4. Analysts watch closely how Apple integrates AI into these new products, with Apple's new AI platform, Apple Intelligence, expected to play a significant role.
Despite high expectations, Wall Street analysts maintain a cautiously optimistic view on Apple's near-term stock performance. UBS analysts continue to hold a neutral rating on the stock. David Vogt of UBS notes that while Apple's AI initiatives are promising, they may not significantly impact the stock price in the immediate term given external pressures from China and regulatory challenges in the EU. He maintains a target price of $236 per share, suggesting a potential 5.9% upside.
Piper Sandler analyst Matt Farrell shared similar sentiments, expressing he will wait for more details on Apple's AI strategies. He holds a target price of $225, implying limited near-term upside. Market enthusiasm is seen as already priced into the stock, with the potential for the AI-focused event to signal longer-term growth opportunities.
Meanwhile, Bernstein’s Toni Sacconaghi points to a balanced risk-reward scenario given Apple’s current valuation levels. On a more positive note, Goldman Sachs maintains a buy rating and a $276 target price, indicating nearly 24% upside, but acknowledges the upcoming event may not serve as a major stock catalyst. Apple’s shares have historically shown mixed performance around product launch events, often rallying before the launch but declining afterward.
FactSet data supports this, revealing that Apple shares typically underperform in September, the month of product launches, with an average drop of 3.5%, contrary to the stock's performance in July and August. This trend accompanies heightened market anticipation ahead of the launch.
Nonetheless, Michael Ng from Goldman Sachs believes the new innovations in the iPhone 16 series, such as larger displays, better camera functionalities, and new AI features, will drive upgrades and user growth. He projects a 1% decline in iPhone revenue for 2024 but expects it to grow by 9% in 2025 and 2026.
On the trading floor, Goldman Sachs also highlighted that an unexpected positive surprise during the event could potentially drive stock prices higher. According to TrendForce, while rising memory prices might increase the cost of Apple's new phones, overall declining smartphone market trends might lead the company to keep prices in line with the iPhone 15 series.
Apple's event will mark the unveiling of its latest AI-based initiatives alongside its core products. The Apple Intelligence suite, including an overhauled Siri, highlights the company's strategic pivot toward enhanced AI capabilities. Though Apple's AI features are still evolving, this falls right into the broader ambition of integrating AI into consumer products, projected to stimulate future growth in both hardware and services segments. This includes anticipated significant updates to the Apple Watch and AirPods lines.
As analysts anticipate, Apple's strategic shift is set to rejuvenate its product line's appeal, potentially driving a cycle of upgrades and mitigating the current slowdown in sales. The focus on AI and enhanced hardware could position Apple as a leader in the consumer AI space, contributing substantially to its revenue, especially within the expanding services domain.