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Apple Stock Analysis: Bernstein Upgrade Signals Potential Turnaround

Apple (AAPL) $174 

Apple had an upgrade from Bernstein this morning after a spate of bad news, notably weaker China sales, and fewer iPhone sign-ups in the US. 

“AAPL has de-rated significantly amid a weak iPhone 15 cycle and fears that Apple’s China business is structurally impaired,” analyst Toni Sacconaghi wrote in a note. “We believe prevailing weakness in China is more cyclical than structural and note that historically Apple’s China business has exhibited much higher volatility than Apple overall, given its very feature-sensitive installed base.” Sacconaghi raised his rating on Apple to Outperform from Market Perform and kept his $195 price target.

While Sacconaghi acknowledges there may be short-term headwinds for Apple, the potential use of generative artificial intelligence features in the next iPhone and tailwinds from the replacement cycle could set up the company “well,” he said. It’s possible the company could top 2025 estimates of $416.9B in revenue and $7.40 in earnings per share, Sacconaghi said.

There are other positive developments.

A possibility of a tie-up with Open AI/Google Gemini for a co-pilot. Apple does have a treasure trove of data, there is no way they haven’t thought about monetizing it with AI. I suspect they are fairly advanced in the process but are as secretive as ever.

Nvidia’s omniverse is to be used with the Vision Pro – to be sure this is not revenue accretive, as the Vision Pro is still likely two years in beta before the product even becomes useful and less of a novelty. It is a step in the right direction for better use cases / commercial or other applications.

Apple steadying out around $167-$170 is a good sign for the rest of the market. They report on Thursday after the market, and while the quarter should be weak, the guidance should be key, along with product announcements or hints for announcements in their June developer conference. I don’t think they should be written off yet.