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Apple (AAPL) is among the largest companies in the world. Valued at a market cap of $2.6 trillion, Apple stock has returned 705% in the past 10 years and a monstrous 36,750% since April 2004, easily crushing the broader market's returns.
However, in the last six months, Apple has underperformed equity benchmarks, including the S&P 500 Index ($SPX), due to various issues - including regulatory concerns, sluggish growth, and slowing iPhone sales in China.
Down 15% from all-time highs, let’s see if Apple stock should be part of your shopping list in 2024.
Analysts Expect a Revenue Decline in Q2
Analysts tracking Apple expect sales to fall by 4.5% year-over-year to $90.6 billion in fiscal Q2 of 2024 (which ended in March). Comparatively, adjusted earnings are forecast to decline by 0.70% to $1.51 per share. In the same period last year, Apple reported revenue of $94.84 billion and earnings of $1.52 per share.
Similar to other consumer electronic companies, Apple reported stellar results during the COVID-19 pandemic, propped up by stimulus checks and higher consumer spending on tech amid a shift toward working and learning at home. However, post-pandemic, rising inflation and higher interest rates led to lower household budgets for discretionary items like Apple's offerings.
Apple is also struggling to maintain its market share in China, a country that accounted for one-fifth of total sales in fiscal 2023. Official government data, via Bloomberg, shows iPhone sales in China fell 33% year-over-year in February, dragging share prices of the hardware giant lower.
Crucially, Apple reported four consecutive quarters of falling revenue in fiscal 2023, the longest slide in top-line numbers for the tech behemoth since the dot-com bubble in 2001. While Apple’s smartphone sales last summer were the slowest in more than 10 years, iPad sales were down 3.4%, and MacBook revenue declined by 27% year-over-year in fiscal 2023.
Meanwhile, in the last 15 months, tech companies such as Nvidia (NVDA), Meta (META), Alphabet (GOOG) (GOOGL), and Microsoft (MSFT) have all showcased how they stand to benefit from the artificial intelligence (AI) megatrend. Comparatively, Apple’s lack of a compelling AI narrative has made investors nervous. But that might change very soon.
Evercore Is Bullish on Apple
According to Evercore ISI, Apple’s latest research paper indicates the company will gain traction in the AI vertical once its devices are armed with on-device inference. Apple published its research paper earlier this month, describing its language model as ReALM or Reference Resolution as Language Modeling.
Apple researchers claimed the performance of smaller ReALM models was similar to ChatGPT-4, even though it was trained using fewer parameters. Due to Apple’s vast ecosystem, it will easily be able to integrate ReALM across billions of devices globally.
Evercore analyst Amit Daryanani is bullish on Apple due to its robust AI results, and maintained an “outperform” rating with a price target of $220 on AAPL stock. Daryanani emphasized, “Given their vertical integration and especially their control over their own silicon, AAPL is best positioned to not only expand the moat surrounding the iOS ecosystem but also potentially drive an accelerated refresh cycle should the final implementation be deemed a big enough change.”
Apple’s annual WWDC developer conference is scheduled for June 10, and it is expected to make a slew of AI-related announcements at the event - which could give wary investors a reason to buy.
Separately, Apple's services business should be a key driver of revenue and profit margins in the upcoming decade. In Q1 of fiscal 2024, Services accounted for 19% of total revenue. Further, the segment reported a gross margin of 73%, higher than the 39% margin for device sales.
What is the Target Price for AAPL Stock?
Out of the 16 analysts covering AAPL stock, 16 recommend “strong buy,” three recommend “moderate buy,” eight recommend “hold,” and one recommends “strong sell,” for a consensus of “moderate buy.”
The average target price for AAPL is $205.42, indicating an upside potential of over 22% from current levels - and representing a premium to the stock's all-time high, as well.
