Apple AAPL stock has gained 22.4% so far this year (as of Monday) and 26.1% in the past year. The company has been a laggard in the artificial intelligence (AI) race, but has picked up momentum of late.
Daniel Loeb-backed Third Point hedge fund bet big on the stock, according to Street.com, on its latest AI initiative. Third Point started to buy Apple shares in April, and the stock was one of its portfolio's top five winners for the second quarter.
Loeb also said that Apple’s stock had become increasingly 'under-owned' by institutional investors, and its relative multiple had squeezed toward a multi-year low, despite Apple stock’s recent run. In its second-quarter earnings report, Warren Buffett's Berkshire Hathaway disclosed a huge reduction in its stake in Apple, citing high valuations, as quoted on Economic Times.
Should You Play Apple Stock With ETFs?
Since there still are uncertainties related to the success of Apple’s upcoming AI rollout, it is better to track the company with the exchange-traded-fund (ETF) approach. The basket approach minimizes the company-specific concentration risks. Apple-heavy ETFs include the likes of Technology Select Sector SPDR Fund XLK, iShares Global Tech ETF IXN and iShares U.S. Technology ETF IYW. Let’s delve a little deeper into the stock’s potential.
Apple's AI Initiative
Loeb has previewed Apple’s new artificial intelligence feature, "Apple Intelligence," as a gamechanger. The AI feature is set to launch in October with iOS 18. This feature looks to enhance Siri (Apple’s original smartphone voice assistant), automate tasks like email generation and image sorting, and integrate advanced functions such as automated photo cleanup and ChatGPT. Loeb expects AI-driven growth to bolster revenues and earnings of Apple.
Apple has developed a new cloud service called Private Cloud Compute to ensure user privacy. This service uses Apple Silicon with built-in privacy capabilities that determine whether a request can be processed on device or needs cloud access. Apple has assured that no user information will be stored in the cloud.
Recent Financial Performance of Apple
Apple reported robust third-quarter earnings, surpassing earnings per share and revenue estimates. While iPhone sales remain important, the iPad segment saw strong growth, indicating market expansion opportunities. However, challenges in Greater China impacted regional sales.
Broker Rating for AAPL Stock
Apple currently has an average brokerage recommendation (ABR) of 1.73 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated on the basis of actual recommendations (Buy, Hold, Sell etc.) made by 31 brokerage firms. The current ABR compares to an ABR of 1.62 a month ago based on 30 recommendations.
Of the 31 recommendations deriving the current ABR, 19 are Strong Buy and three are Buy. Strong Buy and Buy, respectively, account for 61.29% and 9.68% of all recommendations. A month ago, Strong Buy made up 66.67%, while Buy represented 10%.
Price Target for AAPL Shares
Based on short-term price targets offered by 31 analysts, the average price target for Apple stock comes to $241.68. The forecasts range from a low of $184.00 to a high of $300.00. The average price target represents an increase of 6.38% from the closing price of $227.18 recorded on Monday.
Any Wall of Worry for Apple?
Apple’s competitors have faced several AI hiccups before. Google’s Bard provided incorrect answers, and its Gemini image generator displayed inaccurate images. Microsoft’s Copilot+PC standard raised security concerns, while Meta faced criticism for not allowing users to disable its AI chatbot. Apple has always thrived on its reputation for security. Hence, any flaws in its generative AI efforts could harm its brand.
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