Apple’s AI-Fueled Future: JPMorgan Analyst Sees Stock Soaring to New Heights
As Apple Inc AAPL prepares for its Q3 2024 earnings report, anticipation is high. JPMorgan analyst Samik Chatterjee believes Apple is not just riding on past successes but is poised for a significant leap forward, fueled by artificial intelligence. Chatterjee has placed Apple on a "Positive Catalyst Watch," increasing the price target to $265 by December 2025, from the previous $245 for December 2024.
Key Takeaways:
- AI is the new game-changer for Apple. ChatGPT expects a strong AI-driven replacement cycle starting in fiscal year 2025 (FY25, ending September), with a further boost in FY26. This cycle is expected to be fueled by Apple’s impressive FY24 performance.
- The iPhone is set to be a key driver. Chatterjee predicts iPhone sales of approximately 44 million units, generating $39.9 billion in revenue, exceeding the consensus estimates. Strong sales in China and other major regions are expected to contribute significantly to these numbers.
- Apple’s potential in AI could be underestimated. Chatterjee highlights three areas:
- Margin Boost: Premium iPhone sales among early adopters have historically led to impressive gross margin improvements, and this trend is expected to continue despite concerns about component costs.
- Volume Expansion: The AI upgrade cycle has global reach, pushing volumes beyond expectations and potentially exceeding the growth seen in the 5G cycle.
- Prolonged Growth: With advanced AI features for iPhones post-FY26, Apple could experience extended growth, surpassing existing forecasts.
Apple’s AI-Driven Surge: A Detailed Look
AI: The Next Chapter for Apple
Chatterjee believes Apple is well-positioned to capitalize on the upcoming AI cycle, particularly through its iPhone and overall revenue performance. He expects Apple to reassure investors about the significant AI replacement cycle, leveraging a strong foundation built in FY24 with impressive revenue drivers.
Chatterjee predicts a revenue beat for both iPhone sales and the company’s overall revenue. This could address investor concerns about Apple’s premium valuation multiple. He anticipates Apple’s Q3 revenue to reach $85.3 billion, slightly exceeding the consensus of $84.3 billion. Earnings per share are projected to be $1.38, compared to the consensus of $1.34.
iPhone: Leading the Charge
The iPhone is anticipated to be a major contributor to Apple’s success. Estimated sales of approximately 44 million units, resulting in $39.9 billion in revenue, will reportedly surpass the consensus of $38.9 billion. Strong performance in China and other key regions is expected to significantly contribute to these numbers.
Looking ahead to Q4, Chatterjee forecasts revenue of $95.5 billion and earnings per share of $1.62, both exceeding consensus estimates. This represents the second consecutive quarter of year-over-year revenue growth following a decline earlier this year.
The iPhone, Services, and Mac segments are projected to drive growth, while the Wearables, Home, and Accessories segment might experience some decline.
Unveiling Apple’s AI Potential
While Apple’s stock has rallied in recent months, Chatterjee believes there is room for further upside. He sees the AI cycle as presenting untapped opportunities, particularly in improving margins, increasing iPhone volumes, and potentially extending the replacement cycle beyond FY26.
Chatterjee states, "Our Dec-2025 price target of $265 only assumes a 26x earnings multiple on CY26 estimates as they already embed the tailwinds of the AI replacement cycle."
This means that if Apple delivers on its AI promise, the stock could see substantial growth.
The Future is AI-Powered:
Chatterjee’s analysis suggests that Apple is on the cusp of a new era driven by AI. The upcoming earnings report could be a pivotal event, highlighting the company’s AI-powered growth strategy and potentially propelling the stock to new heights.
