Wedbush: AI & pent-up iPhone 16 demand outweigh concerns over China sales

Tim Cook at a game tournament in Apple Taikoo Li, Chengdu

Wedbush raised its Apple target price to $250 in December 2023, specifically because of the company's long-term resilience, and also its enormous base of users. Since then, Apple has seen iPhone sales fall further in China, and it's also cancelled the Apple Car.

In the note, the analysts are clear in saying that they don't underestimate Apple's current problems. In particular, they say that having visited Asia, they have witnessed price discounting on the iPhone because of slow sales.

Those slow sales have at times been overhyped. But it is true that the iPhone 15 does not appear to be as popular in China as the iPhone 14, although Tim Cook blames the difference in part on currency fluctuations.

Calling that situation dismal, the analysts also regard the cancellation of the Apple Car as bad news since they say it means Apple spent a decade on a "long bad bet." They do note that the cancellation means Apple can redeploy staff onto its AI plans, however, and that is one reason it expects matters to improve.

The addition of AI — or more prominent AI at least — is a expected to help increase sales. Wedbush does already expect that iPhone sales will improve with the release of the iPhone 16 range, because it believes that there is a pent-up demand for upgrading.

Previously, it's predicted 220 million to 230 million iPhone sales across the whole of 2024. Based on its new estimates of the demand from upgraders likely to buy the iPhone 16, Wedbush's new note estimates a total of up to 270 million iPhones sold for the year.

Then, too, it notes that Apple's Services are strong and growing at double-digit rates. Plus Apple has what Wedbush describes as the strongest installed base of any company in the world.

It believes that with 2.2 billion iOS devices in active use, that Apple is going to be able to monetize that base further than it already has.

While Wedbush doesn't elaborate on this issue of monetizing existing users, Apple has many opportunities to do so. It can work to increase how many users subscribe to Apple TV+, or its iCloud tiers, or the Apple One bundle — and it can also increase the cost of each of these.

Separately, investment firm Morgan Stanley has recently also come out saying that overall the cancellation of the Apple Car is a good move for the company.