Apple shares have historically trended higher leading up to the tech giant's annual September product launch event. Now, the question remains: Will Wall Street be impressed this time by the new AI-enabled iPhone enough to allow the stock to sustain its recent gains? Apple has leaned heavily on AI optimism, rising 38% from its yearly low on April 19 to Tuesday's close, outperforming the S&P 500 by about 25% over the same period. Apple was able to outperform even as a three-week selloff from mid-July to early August sent the stock into correction territory as a rotation out of big tech stocks and subsequent recession fears hit the market. But Apple shares bounced back, and the 10 days leading up to the latest iPhone launch were a typically strong period for the company's stock. The stakes are especially high this year, given that the source of the stock's gains in recent months has been Apple's efforts in generative artificial intelligence. Investors are hoping the new AI features will boost iPhone sales and make up for weakness in China, the company's second-largest market. The iPhone accounts for nearly half of total revenue. At its annual Worldwide Developers Conference in June, Apple outlined its long-awaited suite of AI tools, Apple Intelligence. Investors praised the results at the time, and the stock price soared the next day, closing at a then-high of $207.15 a share. The stock continued to rise the following month, eventually closing at an all-time high of $234.82 on July 16. The peak roughly coincided with a flurry of bullish forecasts on Wall Street, including Morgan Stanley naming Apple its favorite U.S. IT hardware stock and raising its price target. The stock price then plummeted. The company's stock, now down just over 3% from its July high, could rise to an all-time high if Apple gives users another reason to upgrade their iPhones during its September 9 keynote launch event. Investors also need confidence that consumers will be buying the latest models in droves in the coming months. Clarifying when new AI features will be available on the company's devices could help. Apple typically announces the release dates of its latest iPhone models and their operating systems at its annual launch event. This year, however, many of these anticipated AI features are expected to be available after the release of the iPhone 16 and its latest software system, iOS 18. While it is understandable that Apple would like to see a bug-free Apple Intelligence rollout, the sooner the company can show off its much-talked-about AI features, such as new writing tools, custom emojis, and an enhanced digital assistant, Siri, the sooner users may decide to trade up to the new model. Siri seems to be a big focus for Apple. This year's launch invitation includes the phrase “It's Glowtime,” which likely refers to the company's redesign of the Siri interface. AAPL YTD Mountain Apple (AAPL) Year-to-Date Performance Investors will also be keeping an eye on the list prices of the iPhone 16 and other new hardware products announced during the keynote. Among the questions is whether management will significantly raise these prices, given the expected AI features, and if so, whether the updates will be attractive enough to entice consumers to buy. While CFRA Research analysts expect the prices of the two standard iPhone 16 models to remain the same, starting at $799 for the 6.1-inch device and $899 for the 6.7-inch iPhone 16 Plus. However, the firm speculates that the iPhone 16 Pro and Pro Max could face a $100 price hike. “More importantly, AAPL will decide to raise prices across all four devices as it offers Apple Intelligence (AI), which is a non-trivial cost in itself,” the firm wrote in a note on Tuesday. “AAPL could also increase memory across all phones to further justify price increases, as it did with the Pro Max last year. We believe some price increases are justified, including for AI features, given the upward component cost trend and the larger screen of the Pro.” Improved battery life for the iPhone 16 would be another welcome development that would provide a reason to upgrade regardless of Apple Intelligence. “You have to see what the battery life is, because if you have a battery that lasts a day, a lot of people will upgrade,” Jim Cramer said on Tuesday. Indeed, Apple Intelligence is likely to be the main driver of the upgrade cycle, since those features are only compatible with the new iPhone 16 and last year's iPhone 15 Pro and Pro Max versions. Morgan Stanley expects Apple to ship about 500 million iPhones over the next two years, 6% more units than the record-breaking upgrade cycle from fiscal 2021 to 2022, it said in a July note that made Apple its top pick. Apple's fiscal 2024 ends in September. Wedbush Securities also predicts that AI will fuel a record upgrade cycle. In a client note this week, analysts argued that the financial benefits Apple will reap from AI in the long term could drive the company's market capitalization to more than $4 trillion. (Jim Cramer's Charitable Trust is long AAPL. See the full list here.) Subscribers to Jim Cramer's CNBC Investment Club receive trade alerts before Jim makes the trade. Jim waits 45 minutes after sending a trade alert before buying or selling shares in the Charitable Trust's portfolio. If Jim talks about a stock on CNBC television, he waits 72 hours after issuing a trade alert before executing the trade. The above Investment Club information is subject to our Terms of Use and Privacy Policy, as well as our Disclaimer. No fiduciary duty or liability exists or arises by receipt of any information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
Apple CEO Tim Cook attended the company's annual developers conference event at the company's headquarters in Cupertino, California on June 10, 2024.
Carlos Barria | Reuters
Apple's stock price has historically trended higher leading up to the tech giant's annual product launch event in September. Now the question remains: Will Wall Street be impressed this time by the new AI-enabled iPhone, at least enough for the stock price to maintain its recent gains?
