According to JPMorgan, investor sentiment has improved, thus they are maintaining their $210 price target on Apple. Anticipation of an upgrade cycle driven by AI, which might increase sales, is generating increasing enthusiasm. Apple's valuation is becoming more appealing as a result of the stock's precipitous decline.
The market performance of Apple in 2024 has been negatively impacted by declining data points. According to JPMorgan, however, this isn't dampening the excitement of hedge fund investors, who are patiently waiting for further gains. For what reason? An iPhone upgrade cycle driven by artificial intelligence, and a value premium that moderates, the bank explained.
For the same reasons, JPMorgan is positive as well, with a share price objective of $210. As of 9:20 a.m. ET, Apple is trading at $168.71, which is a 25% gain over where it is now trading. Before anything else, the anticipated AI-driven boost is driving up investor appetite for Apple, just like the 5G enhancements did in 2020 when shares soared.
The arrival of on-device AI upgrades, similar to 5G, will likely increase the phone replacement cycle by two to three years, according to JPMorgan. This is because the technology is projected to be exclusive to subsequent generation phones.
The bank is forecasting that Apple's first "AI phone," the iPhone 17, will be released in September 2025.Thus, JPMorgan expects iPhone shipments to surge to 240 million units in 2026.
"The product cycle will drive an inflection in the revenue and earnings growth in our estimate to 14% and 21% in FY26, respectively, relative to expectations for more muted outcomes in FY24 and FY25," according to the document.
This represents a 7% improvement over the consensus earnings expectation for JPMorgan. A second point is that, similar to the 5G cycle momentum, Apple is now selling at the bottom end of a range of multiples due to its 13.3% year-to-date decline
"Contrary to the deterioration of fundamentals relative to both Hardware demand as well as outlook for Services growth, the interest in AAPL shares have improved from the broader group of investors who have otherwise been averse to the premium valuation multiple despite one of the lowest growth outlooks relative to the other Mega Cap Tech stocks," the bank said.
The bank's outlook on Apple's near-term prospects remains negative, even though its 2026 projections have been raised. Regulatory monitoring has been on the rise, and the corporation has also been under pressure from Chinese competitors.
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