Despite flat iPhone sales through the first half of the year, shares of Apple(NASDAQ: AAPL) are trading up 22.6% year to date, slightly edging out the S&P 500 index. It seems investors are pricing in strong growth prospects as the iPhone maker rolls out its highly anticipated Apple Intelligence update for U.S. customers this fall.
Morgan Stanley analyst Erik Woodring weighed in this week on the stock's potential by maintaining his investment firm's overweight (buy) rating on the shares with a $273 price target. With the stock already up sharply, the question is whether Apple will report better-than-expected numbers in the next few quarters to push the stock up another 16% over the next 12 months or so to reach the analyst's target.
Why is Apple stock up
Some analysts have noted encouraging delivery lead-time data for the iPhone 16 in recent weeks, but it doesn't point to significant upside to Wall Street's near-term revenue estimates (longer lead time implies greater demand for the product). The Wall Street consensus currently calls for Apple's fiscal Q4 2024 revenue to increase 13% year over year to $94 billion before accelerating to 14% year over year in fiscal Q1 2025 ending in December.
The new artificial intelligence (AI) features coming to Apple's devices are not only about selling more devices but driving more growth in services, such as App Store purchases and subscriptions. While Apple Intelligence is a free update to Apple's software, the company should see a return on investment in AI from increasing user engagement and potential new revenue-generating service offerings that take advantage of the technology.
Apple's services revenue has been the company's main growth driver, especially for earnings growth, considering the higher margins that app sales and subscriptions generate. Wall Street analysts forecast Apple's full-year revenue to increase 8% in fiscal 2025, with earnings up 12%. If it beats those numbers, Apple stock could hit Morgan Stanley's target within the next year.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
- Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $20,803!*
- Apple: if you invested $1,000 when we doubled down in 2008, you’d have $43,654!*
- Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $404,086!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of October 21, 2024
John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.
