Before the company's Worldwide Developers Conference next week, investors are anxiously awaiting what some see as the next big event to boost the company's flagging iPhone sales. Wall Street excitement about Apple's artificial intelligence capabilities helped the company achieve its highest share price of the year.
KEY FACTS
- As a result of Apple's massive share buybacks, which have caused a billion-dollar disparity, the company's shares surged as much as 1% to $196.42 on Wednesday, marking the first time since January that the share price has crossed the $3 trillion mark.
- Apple's 15% decline from January to April has now been fully erased as the market purchased other stocks that were viewed as more fashionable AI wagers and dumped Apple stock.
- Among the many analysts who praised Apple's annual event in notes to clients this week, raising the company's share price, is Samik Chatterjee of JPMorgan. He said the conference, which begins on Monday, will "highlight whether Apple has successfully caught up with the rest of the industry, despite a perceived delay in relation to investments in AI."
- The WWDC event, according to Chatterjee, could "successfully trigger an upgrade cycle" for the iPhone, providing much-needed support for Apple as Q2 sales of the device are predicted to be the lowest since 2020, based on FactSet's compilation of consensus analyst projections.
- According to Chatterjee, the cycle of smartphone upgrades—which will see the estimated 1.5 billion iPhone users trade in their old models for the newest—begin this year and pick up speed in 2025 as macroeconomic conditions are expected to improve and consumer demand for AI-powered devices increases.
- If Apple announces that it will be prepared to roll out generative AI across iPhone-specific apps like Siri and iMessage by September, that will be the main "watchpoint" at WWDC, according to Chatterjee.
CRUCIAL QUOTE
If the excitement around AI at WWDC affects Apple stock. "We think this year is different as Apple formally enters the Gen AI competition," forecasted Morgan Stanley analysts lead by Erik Woodring. "Historically, WWDC is not a big stock catalyst for Apple."
KEY BACKGROUND
Given that the stock's 7% return is less than both rival Microsoft's 23% return and the S&P 500's 25% return, investors in Apple have had an exceptionally cold year. With its first-quarter net income 20% greater than the same time in 2023—much better than Apple's -2% bottom line growth—Microsoft, which surpassed Apple earlier this year to become the most valuable business in the world, has more visibly turned the increasing interest in AI into earnings growth than Apple. Although Tim Cook, Apple's CEO, stated in February that the business had invested "tremendous amount of time and effort" in generative AI, the company has been relatively silent about its AI services to the public. Apart from the confusion around Apple's strategy for monetizing AI, the main source of investor annoyance has been the company's declining core business in China, where sales are predicted to be 7% less than 2022's record $74.2 billion, as reported by FactSet.