William Gallagher
In a note seen by AppleInsider, investment firm Wedbush has told its clients that it is maintaining its price target for Apple, despite what it describes as a horror show of current problems.
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.
Wedbush's price target for Apple over the years (Source: Wedbush)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.
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Malcolm Owen
Charles Martin
Amber Neely
Andrew Orr
Christine McKee
15 Comments
I believe that as iPhone sales in China decrease, much of that will be made up by increasing sales in India with an ever growing Apple footprint there along with a younger and wealthier demographic trend.
The cancellation of the Car was not a $10 billion loss, much of that research into full self driving systems can and will be applied to various AI technologies and will also be a long term win for Apple.
With respect to "pent-up demand for iPhone 16", Wedbush made the same claim when justifying their price target before iPhone 15 came out. I guess a broken clock is going to be right at least twice a day? I have no idea why analysts expect AI to be a big growth generator for Apple.. Apple has been using AI for years (e.g. object and people recognition in Photos). All Apple can really do with the latest AI craze, generative AI with large language models, is to improve Siri. While Siri needs a lot of improvement, I don't see people flocking to iPhone, even if she gets a lot better as an assistant.
Analysts are just grasping at straws when it comes to Apple. The fact is that it's been 8 years since Apple has produced a great new mass market product that helped its bottom line - AiirPods (2016) and Apple Watch (2015). The recently announced Vision Pro won't contribute meaningfully to growth for years. So AAPL investors have nothing to look forward to. Although services are growing well, the gains there won't be more than the stagnation and outright reduction in iPhone sales that are seen now.
20% of Apple's sales come from China alone. The economic situation there as well as the geopolitical rivalry with the US won't be resolved anytime soon, so I doubt sales there will improve in the near future. Another poster mentioned India growth offsetting China sales losses. I don't believe that. First of all, sales in India are tiny in comparison. Yes, they are growing nicely, but it'll be years before they approach the sales volume in China.