Morgan Stanley on Monday, named Apple as a top-pick stock. This decision came right after Apple introduced Apple Intelligence, a suite of AI features exclusive to the latest iPhones.
According to Morgan Stanley analysts, this new technology could prompt millions of users with older models to upgrade. Following this announcement, Apple shares have reached an all-time high, per Bloomberg.
Apple Stock Forecast and Apple Intelligence Beta
Last month, Apple unveiled Apple Intelligence, designed to bring advanced AI capabilities to iPhone, iPad, and Mac users. However, there's a catch: this feature is only available on the latest iPhones. So, this exclusivity could drive a huge number of iPhone users to upgrade their devices, according to Morgan Stanley analysts. Apple Intelligence is a "clear catalyst" for iPhone upgrades and will enable Apple to sell nearly half a billion iPhones in the next two years, analyst Eric Woodring stated.
Apple Intelligence is set to debut this fall with the iPhone 15 Pro and 15 Pro Max. Older models won't have access to these AI features, which include AI-generated emojis, a smarter Siri, and direct access to ChatGPT. Some Siri upgrades might come next year.
"We believe that there is a record level of pent-up demand entering the iPhone 16 cycle later this year," Woodring noted, adding that Apple Intelligence delivers "unique-to-the-Apple-ecosystem" value.
Morgan Stanley previously forecasted that Apple would sell around 230 million iPhones in the same time frame, making the new prediction more than double the previous one.
Apple’s Market Position and Revenue Impact
Apple’s strong market position and revenue performance support Morgan Stanley's positive outlook. According to Nasdaq, in the second quarter of 2024, over half of Apple's revenue came from iPhones, with the company holding the majority market share for smartphones in the U.S. Despite a 10% year-over-year decline in iPhone sales, Apple's overall revenue exceeded Wall Street expectations.
Following its fiscal Q2 earnings report after the close on May 2 which showed a slight revenue decrease but surpassed estimates, Apple shares jumped nearly 6%.
Furthermore, reflecting on the Q2 performance, CFO Luca Maestri said, “Thanks to very high levels of customer satisfaction and loyalty, our active installed base of devices has reached a new all-time high across all products and all geographic segments, and our business performance drove a new EPS record for the March quarter.”
Analysts' Predictions: What Does the Future Hold?
Wedbush Securities analyst Dan Ives predicted that over 15% of current iPhone users might upgrade to the new models this fall as per Reuters in June. He estimated that around 270 million iPhone users haven't upgraded in the past four years.
Apple is also uniquely positioned to be the AI "base camp" for its customers, "just as it has done for digital content (iPod) and social media (iPhone)," wrote Morgan Stanley analyst Ananda Baruah. Analysts tracking Apple shares predict the company’s profit to reach $6.59 per share in fiscal 2024, up 7.5% year over year, and climb another 12.1% to $7.39 per share in fiscal 2025.
At the time of writing Apple’s market cap is at $3.584 trillion, making it the largest company in the world, ahead of Microsoft, Nvidia, Google, and Amazon.