Wall Street Analyst believes Apple's Share Price may Reach $273. Worthy of Investment?
The shares of tech giant, Apple (AAPL, currently at 1.97%), have witnessed a 22% rise in value since the beginning of 2024. Morgan Stanley analyst Erik Woodring keeps faith in the company, maintaining an overweight (buy) stance and setting a price target of $273, which translates to a potential 15% increase from the current $237 price point.
But, the question remains – will Apple's integration of AI, or "Apple Intelligence," be the game-changer that Apple enthusiasts have been anticipating?
A recent CNET survey revealed that extended battery life ranked higher in priority for Apple users, as compared to AI features. If these survey results reflect the current sentiment, it might imply that Apple Intelligence might not drive iPhone upgrades to justify the share prices' current lofty heights.
The AI landscape, however, is constantly evolving, and OpenAI's ChatGPT's integration with Apple Intelligence showcases the technology's potential for future advancements. A few years into the future, users' perception of AI's value might alter considerably.
Ultimately, the success of Apple's AI integration in driving iPhone upgrades and, thus, impacting stock performance, remains uncertain. It's a wait-and-see game for now.
Apple's iPhone sales saw a modest growth of less than 1% in fiscal 2024, with analysts predicting a 6% increase for 2025, coupled with a projected 21% earnings growth. Over the long term, earnings growth is estimated to be 10%, which doesn't appear sufficient to support the current high P/E ratio of 38.
AI's role in driving stronger growth in 2025 is conceivable, but given the stock's high P/E, investors might already be banking on this growth. It would be wise to wait for either a share price correction or confirmation of double-digit iPhone sales increases propelled by AI before making an investment decision.
It's pertinent to mention that experts anticipate Apple's Services segment to continue its growth trajectory. High-margin services, such as app store spending, are projected to increase by 15% in Q1 FY25. Analysts remain cautious about the stock performance due to the high P/E ratio and conservative guidance, but long-term prospects stay promising with new product introductions and iPhone upgrades potentially providing opportunities for stock dips.
In light of the high P/E ratio of Apple's stock, investors might be relying on the expected growth from AI to justify the current price. To make a well-informed investing decision, it could be beneficial to wait for a potential share price correction or evidence of significant iPhone sales increases due to AI integration.
Furthermore, managing one's personal finance wisely may involve considering the potential risks and uncertainties associated with investing in tech giants like Apple, including the impact of AI integration on stock performance.
