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Apple ( NASDAQ:AAPL ) is expected to launch its AI-powered iPhone 16 at the "It's Glowtime" event on September 9 at 10:30am in its Cupertino headquarters. This event will be closely watched, for a few reasons. For one, the company is expected to rollout its AI capabilities with this release, setting a new industry standard in the smartphone market. For Apple investors who like the company paving its way into new markets and dominating these markets for decades, that's good news.
Given that we're just hours away from this event, let's dive into what the company is expected to announce, what analysts think of the company's upcoming iPhone release, and how Apple Intelligence (which will be launched for its iPhone, iPad and Mac products) will affect its future earnings prospects.
Indeed, Wedbush analysts predict that 300 million iPhone owners hadn't upgraded their iPhones in over four years. If that's the case, and this Apple Intelligence integration is enough to get these buyers off the sidelines, that could mean there's the potential for a massive super cycle in iPhones once again, with as many as 240 million new phones potentially bought up by the market.
Let's dive into whether these numbers are likely to be remotely accurate.
Key Points About This Article:
- Apple's "Glowtime" event today will usher in a new set of iPhone products, and highlight the company's new Apple Intelligence product rollout.
- Analysts remain bullish on this upcoming event, which could pave the way for yet another iPhone super cycle.
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What Goldman Sachs Has to Say
A Goldman Sachs sign on the wall, with Goldman Sachs' stock price on a TV as well
Goldman Sachs analysts recently noted that Apple's iPhone 16 event could lift its stock if any unexpected "upside surprises" are revealed. The investment bank suggested these surprises could push the stock toward its $276 target, a 25% increase from Wednesday's close. Despite this potential, Apple shares typically underperform the S&P 500 by 0.70% on iPhone announcement days since 2019.
There are four potential places where Apple could surprise to the upside, at least according to Goldman Sachs. Analysts believe that a price hike for new iPhones, an earlier release of Apple Intelligence features, new iPad announcements, and better-than-expected telecom promotions could be reasons why this stock trades higher following this event. Any sort of price hikes that boost revenue, as a result of increasing base model storage to 256GB from 128GB, for example, could lead to more upside in AAPL stock. Notably, the iPhone Pro hasn't increased in price for five years, so this will be a key metric to watch.
Such a price hike may be more likely, considering the iPhone 16 is largely going to be viewed as a "next-gen" smartphone, with its integrated AI capabilities. We'll have to see if Apple can chart the way forward to higher smartphone prices, and if other companies follow suit. It will all depend on the initial demand for these phones, as indicated by preorder activity over the coming weeks.
Apple's Financials
A financial statement showing tabulated figures
For the third quarter ending June 29, 2024, Apple’s net sales rose 4.9% year-over-year to $85.78 billion. The company's gross margin increased 9% to $39.68 billion, while operating income grew 10.2% to $25.35 billion. Net income climbed 7.9% to $21.45 billion, with earnings per share up 11.1% to $1.40.
These results highlighted the strength of the company's existing lineup, and we'll have to see how this new iPhone and Apple Intelligence rollout play into the numbers for the coming quarters. Analysts project Apple’s fourth-quarter 2024 revenue to increase 5.2% year-over-year to $94.14 billion, with EPS expected to rise 9.3% to $1.60. Apple has exceeded revenue and EPS estimates in the past four quarters. For fiscal 2024, revenue is forecasted to grow 1.9% to $390.40 billion, with EPS up 9.2% to $6.69. In fiscal 2025, revenue and EPS are anticipated to increase 7.7% and 10.9%, reaching $420.29 billion and $7.42, respectively.
Apple's revenue grew at a compound annual growth rate (CAGR) of 8.3% over the past five years, with EBITDA rising at 11.5% and levered free cash flow at 14%. Net income and EPS increased at CAGRs of 12.9% and 17.4%, respectively. Apple’s trailing 12-month EBIT margin of 31.27% exceeded the industry average by 539.5%, while its EBITDA margin of 34.18% was 242.4% higher. The company’s net income margin of 26.44% surpassed the industry average by more than five-fold, highlighting just how profitable this consumer discretionary stock is.
Should You Buy Apple Stock Right Now?
Apple logo on the side of a corporate office
Some analysts doubt the iPhone 16 will provide significant enough upgrades to justify a true iPhone super cycle. Others seem to believe that this Apple Intelligence integration could be the catalyst many investors have been waiting for as a reason for consumers to go out and upgrade their phones. We'll see.
Personally, I'll be upgrading my iPhone regardless of what's said at this event (my cracked screen just isn't legible anymore, so it's a "necessary" purchase, at least in my view). Those who have held their phones for multiple years like myself may find themselves in a similar boat, and these AI capabilities may simply be what tips the decision into "buy" from "hold" for so many consumers.
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