Apple shares have historically trended higher into the tech giant’s annual September product-launch event. Now, the question remains: Will Wall Street be impressed this time around with the new AI-enabled iPhone, at least enough for the stock to sustain its recent run? Apple has relied heavily on AI optimism to advance 38% since its lows of the year on April 19 through Tuesday’s close, outperforming the S & P 500 by roughly 25 percentage points over that same timeframe. Apple was able to outperform despite a three-week skid between mid-July and early August that sent shares into correction territory, as a rotation away from large tech stocks and later recession concerns hit the market. Shares of Apple have regained their footing, though, and are within a typically strong period for the stock in the 10-day run-up to the latest iPhone announcement. The stakes are especially high this year, given the source of the stock’s strength in recent months has been Apple’s generative artificial intelligence efforts . Investors hope that new AI features will boost iPhone sales — which make up nearly half of overall revenue — and offset weakness in its second-largest market, China. Apple outlined its long-awaited slate of AI tools, dubbed Apple Intelligence, at its annual Worldwide Developers Conference in June. Investors at the time liked what they saw, with shares surging the following day to a then-record close of $207.15 a share. The stock continued to climb into the next month, ultimately closing at a record of $234.82 on July 16. That peak roughly coincided with a slew of bullish Wall Street calls, including Morgan Stanley naming Apple its favorite U.S. IT hardware pick and raising the stock’s price target. Then that sell-off ensued. The stock – currently a little more than 3% off its July highs – could climb back to record levels if Apple gives users another reason to upgrade their iPhones during the launch-event keynote on Sept. 9. Investors also need assurance that consumers are going to buy the newest model in droves in the months ahead. Clarifying when the new AI features will be available on its devices should help with that. Apple typically announces the release dates for the newest iPhone models and its operating system at the annual launch event. But this year, many of these anticipated AI features are expected to be available after the iPhone 16 and its newest software system, the iOS 18, are released. We understand the desire to have a bug-free Apple Intelligence rollout, but the sooner the company can flex its buzzy AI features such as new writing tools, custom emojis, and an enhanced Siri digital assistant, the sooner users may be convinced to swap up to newer models. Siri seems like a big focus for Apple. This year’s launch invite includes the phrase, “It’s Glowtime,” which is likely a reference to the company’s Siri interface redesign. AAPL YTD mountain Apple (AAPL) year-to-date performance Investors also will be watching the sticker price of iPhone 16 and other new hardware products when they’re revealed at the keynote. Among the questions: Will management raise these prices substantially given the expected AI capabilities? And if so, will the updates woo consumers enough to buy them? Although we don’t have an ideal price point in mind for these devices, our hope is the cost is reasonable enough for Apple users to trade up their devices in the future. CFRA Research analysts expect that prices for the two standard iPhone 16 models will remain the same, starting at $799 for the 6.1-inch device and $899 for the 6.7-inch iPhone 16 Plus. But, the firm speculated that the iPhone 16 Pro and Pro Max could face a $100 price increase. “What will be more telling is if AAPL decides to hike the price across its four devices as it offers Apple Intelligence (AI), which itself is no small cost,” the firm wrote in a Tuesday note. “AAPL could also boost the memory across all the phones as it did with the Pro Max last year to further justify an increase. Including AI capabilities, the trend of rising component costs and larger screens for the Pros make us believe that some price hikes could be in order.” Improvements in the battery life of the iPhone 16 would be another welcome development, representing a reason to upgrade independent of Apple Intelligence. “We need to see how much battery life there is because there’s a lot of people who will trade up if they can have a battery that will last for a day,” Jim Cramer said on Tuesday. To be sure, Apple Intelligence is likely to be the main driver of the upgrade cycle because those features will only be compatible on the new iPhone 16 and last year’s iPhone 15 Pro and Pro Max versions. Morgan Stanley estimates the company will ship nearly 500 million iPhones over its next two fiscal years, 6% above the biggest upgrade cycle in history between fiscal 2021 and 2022, the firm said in its July note, which elevated Apple to its top pick. Apple’s fiscal year 2024 ends in September. Wedbush Securities also is forecasting a record upgrade cycle fueled by AI. In a note to clients this week, analysts argued Apple’s financial windfall from AI over time could lift its market capitalization above $4 trillion. (Jim Cramer’s Charitable Trust is long AAPL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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Apple CEO Tim Cook attends the annual developers conference event at the company’s headquarters in Cupertino, California, on June 10, 2024.
Carlos Barria | Reuters
Apple shares have historically trended higher into the tech giant’s annual September product-launch event. Now, the question remains: Will Wall Street be impressed this time around with the new AI-enabled iPhone, at least enough for the stock to sustain its recent run?
