Cupertino giant Apple (NASDAQ:AAPL) has lagged behind its Magnificent Seven peers in the stock market over the past year. Its stock gained 11.7% last year, trailing the S&P 500’s 18% gain. However, we’ve seen an excellent rebound in Apple stock in the past three months, jumping north of 33%. Analysts have been buzzing over its long-awaited foray into artificial intelligence (AI) and a major iPhone upgrade cycle commencing in September. Given the strength of these catalysts, Apple stock is a buy, offering plenty of upside potential.
AI was the missing piece in Apple’s puzzle, but business picked up in a big way following the release of Apple Intelligence at its Worldwide Developers Conference. Additionally, recent reports have shown that Apple’s previous dipping sales in China are improving. Layered with a slew of analyst upgrades, it’s an excellent time to load up on Apple stock before earnings.
Steering Through a Massive Upgrade Cycle
Apple has been biding its time on the sidelines, leaving its supporters on edge as rival tech firms hurried to layer AI into their offerings. However, those concerns were laid to rest when the tech giant unveiled Apple Intelligence. True to its form, Apple has taken its time to build a product that could redefine quality standards and user experiences. The success of Apple Intelligence is still up in the air, yet it could ignite a massive demand wave from loyal iPhone users and new customers alike.
Consequently, multiple analysts have upgraded price targets for Apple stock ahead of the iPhone 16’s launch. Celebrated analyst Dan Ives of Wedbush paints a bright future for the company, expecting “monumental” demand, underscoring a massive upgrade cycle powered by AI features. If Apple can expand its robust AI capabilities across 2.2 billion active devices, it could be a juggernaut in the consumer AI space.
Ives adds that the ripple effects could be huge. He expects other tech players to follow the lead, which effectively paves the way for Apple to build a “multi-pronged AI revenue stream,” potentially adding $10 billion annually to its top line.
It’s important to note, though, that the relatively underwhelming reception of recent iPhone models has tempered expectations. However, all signs point to a breakthrough for Apple as it looks to stamp its authority in the tech space again.
Furthermore, investment bank Morgan Stanley recently raised its price target for Apple stock to $273, pointing north of a 21% increase from current levels. Also, Loop Capital projects an even more optimistic $300 price target, pointing to more than a 30% surge in value.
Earnings Insights: Unpacking Q3’s Positive Surprises
Apple is expected to post its fiscal third-quarter (Q3) earnings after the bell on Thursday. Analysts have mostly revised earnings expectations upward, with 19 positive revisions against just six downward adjustments. The tech giant expects to post a whopping $84.44 billion in sales, reflecting a 3% year-over-year growth. Additionally, net income is expected to be $20.66 billion or $1.35 per share, reflecting a 7.2% increase from the prior-year period.
Perhaps one of the main areas investors will focus on will be Apple’s sales in China. Despite the concerns, analysts expect an encouraging turnaround in sales from that region in Q3. A report posted in April showed a striking 52% jump in foreign-made smartphone sales in the region, pointing to a strong recovery for the iPhone. Moreover, a recent Bloomberg highlighted a 33% surge in Apple’s sales in India over the past year.
These numbers are critical for Apple as it looks to diversify its revenue streams while alleviating investor anxiety from past disappointments. As it expands its presence in underserved markets, these regions could become major catalysts for sustained growth ahead.
Final Word on Apple Stock
Apple is back in business, following its strategic pivot to AI and a significant iPhone upgrade cycle. The release of Apple Intelligence at the WWDC has sparked massive excitement about its future potential and the impact on iPhone 16 sales. Additionally, it’s on the comeback trail in China, complemented by robust growth in the Indian market. These bullish signs indicate a sales turnaround from a dipping trend that had analysts worried at the start of 2024.
Furthermore, if Apple successfully integrates its AI capabilities across its devices, it could add billions in incremental sales. Despite some past product reception issues, the outlook for Apple is remarkably bullish, with analysts expecting a superb upside ahead. Thus, buying AAPL stock before the earnings report tomorrow could lead to a strong kickstart for a sustainable rally for investors.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines