By Brian Swint

Apple, the maker of iPhones, has come in for a lot of flack after delaying artificial intelligence upgrades on its models. But analysts at Melius Research led by Ben Reitzes believe there's still a way for the stock to recover.

Last week Citi and Morgan Stanley lowered their expectations for iPhone sales this year, and high-profile blogger John Gruber called the delay to new features in Siri, Apple's voice assistant, a "fiasco" that will damage the company's credibility.

But Reitzes said the company's upgrade to the iPhone X a few years ago offers lessons. In 2017, the introduction of larger screens and Face ID -- which lets users unlock their device without pushing a button -- allowed the company to significantly raise prices, though unit sales remained flat. Overall sales grew and the stock ended up adding 46% over the following 12-month period.

Apple could soon create a similar effect by mixing up its iPhone lineup and eventually adding foldable phones. Melius acknowledged the U.S. trade war with China is a problem for Apple, but things could improve if reports are confirmed that the company is working with retailer Alibaba to develop local AI services. There's also a chance Apple will be able to negotiate an exemption from tariffs.

What's more, Apple has the best cash-flow generation among the biggest U.S. technology companies, the analysts said. That means the company will keep up its impressive pace of share buybacks for the foreseeable future.

Melius has a price target for Apple shares to reach $290 in two years. The stock traded down 0.2% in Monday's premarket at $213. Futures for the S&P 500 and tech-heavy Nasdaq 100 were down 0.2% and less than 0.1%, respectively.

Write to Brian Swint at brian.swint@barrons.com

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March 17, 2025 08:43 ET (12:43 GMT)

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