Apple shares edged higher in early Wednesday trading, with the stock pinned near the lowest levels in a month, after a top Wall Street analyst pointed to an impending multiyear cycle of iPhone upgrades tied to the tech giant's AI push.
Apple (AAPL) shares have been under pressure for much of the past month, and have extended declines since the iPhone 16 launched Sept. 10, amid concern that the slow rollout of AI-powered features on the flagship device would blunt demand for new purchases and upgrades.
Reports of quicker lead times for new iPhone 16 orders, which can be a good proxy for measuring the balance between Apple's supply plans and consumer demand, have also suggested muted early uptake for the new handsets, which went on general sale this week and are priced largely in line with last year's models.
Taiwan-based Apple analyst Ming-Chi Kuo reported earlier this week that Apple sold an estimated 37 million new iPhone 16 units in its opening weekend, down around 12.7% from the first days after last year's iPhone 15 launch.
Demand for the new iPhone series could prove crucial for the broader AI-investment thesis, as Apple is seen as the best-placed tech group to deliver the new technology at the consumer-facing level through its 1.4 billion user base.
'Multiyear iPhone upgrade cycle when, not if'
Morgan Stanley analyst Erik Woodring, however, says iPhone lead times don't carry the predictive power that investors sometimes assume, and he continues to see a big uptick in demand over the near term.
"Historically, first-two-week lead times are directionally predictive of next-12-month shipments at the model level, but they don't provide much insight into December-quarter iPhone build revisions or total iPhone shipments," Woodring said in a note published Tuesday.
Related: Apple stock slides as big iPhone 16 bet sputters
Woodring reiterated his 'buy' rating and $273 price target on Apple stock, a level that suggests 26% upside for Apple over the next 12 months.
"What’s more important is how iPhone 16 lead times trend over the next 10 days," he added. "We see near-term stock downside to $200, which we'd be buyers of, given that the multiyear upgrade cycle is a 'when, not an if,'" he added.
IPhone sales: Evolution or revolution?
CFRA senior equity analyst Angelo Zino also argues that early iPhone lead times aren't a reliable indicator of demand, noting the small sample size and time horizon that could skew the dataset.
Zino sees "mid-to-high-single-digit percentage growth" in iPhone 16 and iPhone 17 sales. But he says the uptake will "not be a super cycle" but rather an "evolutionary one that will take several cycles to witness the true benefits."
Related: Huawei answers Apple's iPhone 16 with the first trifold phone
"We are disappointed by the lack of high-end pricing changes and limited AI-rollout details while we await how aggressive telcos will be with promotions. The event provided no major catalyst," said Zino, who also affirmed his 'buy' rating on Apple stock in a note published Tuesday.
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Apple is scheduled to publish its fiscal-fourth-quarter earnings report on Oct. 31, with early estimates suggesting earnings of around $1.60 a share on revenue of $94.4 billion.
Apple shares were marked 0.12% higher in premarket trading to indicate an opening bell price of $217.20 each.
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