How is Apple positioned amid the artificial-intelligence revolution? It’s the question weighing on the company following an earnings season dominated by AI hype, but Evercore analysts think stockholders just need to be patient and they could be rewarded with a boom in iPhone sales.
Apple
has been relatively tight-lipped about its AI plans compared with big technology peers such as Google-parent
Alphabet
and
Microsoft.
However, Evercore’s Amit Daryanani expects that to change, as the necessary calculations for AI shift from taking place on cloud servers to being performed on the ‘edge’, or on mobile devices.
“We think Apple is best-positioned to bring AI inference to the edge via the iPhone, and if executed correctly, could drive shorter replacement cycles, additional pricing opportunities and a stronger moat around the business,” Daryanani wrote in a research note on Sunday.
The Evercore analyst said an AI-driven iPhone—for example featuring a revamped Siri digital assistant—could prompt customers to replace their smartphones more frequently. Daryanani noted that with users currently replacing their iPhones roughly once every 44 months, if Apple could bring that down by one month then it would imply selling 25 million more units, adding $7 billion to its revenue and between 30 and 40 cents to its earnings per share.
Daryanani kept a $220 target price on Apple stock and an Outperform rating.
Every company wants to be seen as an AI stock nowadays, and so far Apple is missing out. Its shares were down 0.6% in early trading Monday at $187.64, and the stock was down 1.9% this year through Friday’s close. However, ever since the first iPhone was launched in January 2007, the story has generally been that users’ favorite way to use new technology is on their smartphones—if that becomes true with AI then Apple could flip the narrative pretty quickly.
“We believe the ‘Super Bowl moment for Apple’ will be when Cook & Co. finally take the covers off the generative AI technology being worked on in the labs of Apple Park and introduce it to developers and consumers at WWDC in June followed by the exclusive AI features we expect to be included on iPhone 16,” Wedbush analyst Daniel Ives wrote in a research note on Sunday.
Ives said the incremental revenue from services from Apple around AI could be more than $5 billion annually. He kept an Outperform rating and $250 target price on Apple.
Elsewhere, the debate about the role of TikTok in the U.S. has taken another twist as President Joe Biden’s reelection campaign joined the video app TikTok on Sunday. That’s despite the efforts of some lawmakers to get the app, owned by China’s ByteDance, banned in the U.S. and the Biden administration ordering its removal from federal government-owned phones and devices.
Still, especially in an election year, politicians go where the voters are and for young people that often means TikTok. The first clip from the Biden campaign on the app poked fun at the conspiracy theory that he was “deviously plotting to rig the season so the [Kansas City] Chiefs would win the Super Bowl.”
If you hadn’t heard, the Chiefs won the Super Bowl in overtime in a stunning comeback. If the Biden campaign can keep up that level of viral content for TikTok and it connects with younger voters, it’ll be interesting to see where that leaves a ban on the app. If it gets shelved, it will keep up the competitive pressure on rivals
Meta Platforms
and
Snap.
Write to Adam Clark at adam.clark@barrons.com
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