William Gallagher
Investment firm Evercore says Apple is facing weakening demand and strong competition from AI rivals, but investors should stick with it for the long term.
Evercore tends to be positive about Apple. It remains that way mostly because of continued growth in the App Store, for instance, plus wearables and services.
It remains positive now, but says that its clients have been looking for sell off Apple stock for three specific reasons.
In a note seen by AppleInsider, Evercore reports that investors are looking to move to AI-focused stocks, such as Nvidia. This is apparently a particularly common consideration, with Evercore analysts saying that they are hearing it a lot.
There is also a concern that China demand is weak. Specifically, it's believed that local Chinese firms are regaining smartphone market share.
Then, investors are also hesitant because of the potential impact on Apple of the legal case between the Department of Justice and Google. Separately, it's been reported that Apple could lose as much as $20 billion annually, if Google loses this case.
While acknowledging that all three reasons for selling Apple stock have merit, Evercore says the selling off so far has been overdone. The company is maintaining its $220 target price, and says that it sees multiple ways that Apple can end the slump.
Evercore believes that Apple's strategy of keeping AI on-device expected to debut at WWDC 2024 will be successful. Its analysts say that should make for a better and more popular AI experience for users.
Plus the extended use of AI will drive upgrades of the iPhone, as the AI features require more powerful devices.
Once again, Evercore believes that Apple's Services are underappreciated, and especially so over how it is accelerating. Evercore thinks that the App Store and Apple Music will remain stable, while Apple TV+ will grow.
Evercore also believes that in order to fulfill its previous commitments to investors, Apple will sustain or accelerate its buyback program. The company expects Apple to announce more news about this at its next earnings call.
Separately, investment bank Morgan Stanley has previously made similar conclusions about Apple's AI strategy. It believes that the on-device plan means that Apple is the best-placed firm to benefit as AI goes mainstream.
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15 Comments
Hear Hear...
Evercore said on the 4th of March 2024 that AAPL is removed from their "outperform" list.
Now, Evercore is appealing that investors should stick to AAPL for long term.
But the recent moves and rumors are clearly showing that AAPL feels under pressure.
Their ad business on App Store, ads on TV+ need to be realized to cover all potential losses from their sideloading and potential $20 billion wipeout in case Google loses their antritrust case.
The EU made the AAPL´s core value and business weaker than ever. Thanks to the EU (NOT!).
Let´s see how Tim Apple responds to his growth strategy (Does it ever exist?).