In a note on Wednesday, New Street Research analysts forecast a 10% lag in iPhone 16 shipments for fiscal year 25, forecasting 215 million units, which is below consensus estimates.
Early indications are that the reception of the iPhone 16 by consumers has been tepid, with analysts attributing this to “disappointing innovation” and delays in Apple (NASDAQ:AAPL) Intelligence, the company’s genetic AI platform.
Despite these concerns, New Street believes the stock will only experience a temporary dip, noting that Apple has become less sensitive to iPhone performance in recent years.
They maintain a neutral rating on Apple with a $225 target price, which is based on 30x FY26 EPS and represents a 40% premium to the S&P 500, based on Apple’s five-year average valuation.
The report highlights that while AI is expected to revolutionize mobile devices over time, it will not be a key driver of growth in this product cycle.
The company believes Apple’s artificial intelligence, branded Apple Intelligence, has the potential to transform user interactions through natural language processing and context awareness.
However, according to New Street Research, these features are “unlikely to lead to game-changing user experiences” during this cycle.
Instead, they predict that AI will become more deeply integrated into Apple’s ecosystem over time through subsequent software updates.
One of the most notable aspects of the AI expansion is its compatibility with devices powered by Apple’s A17 Pro and M1 chips, covering 200-250 million devices, which represent about 10% of the company’s active installed base. New Street said.
While this offers long-term potential, the company does not expect it to lead to significant hardware sales in the near term.
New Street suggests investors temper their expectations for the iPhone 16 while keeping an eye on Apple’s long-term AI prospects.
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Reference;
Boughedda, S. (2024) Apple stock: New Street Research sees a 10% miss on iPhone 16 shipments By Investing.com, Investing.com. Investing.com. Available at: https://www.investing.com/news/stock-market-news/apple-stock-new-street-research-sees-a-10-miss-on-iphone-16-shipments-3632237 (Accessed: 25 September 2024).
