If you’ve been keeping an eye on Apple (AAPL), you know it’s been a wild ride lately. The stock took a beating in the first four months of 2024, dropping 8% while the Nasdaq-100 Technology Sector index climbed 6%. Why? Stagnant growth and a DOJ lawsuit knocked investor confidence. But then May came along, and Apple bounced back with a 12% surge thanks to strong Q2 results for fiscal 2024, announced on May 2.
Quick Stats
- Current Price: $196.89 (+1.24%)
- Market Cap: $3,019B
- 52-Week Range: $164.07 – $199.62
- Volume: 53M (Avg: 60M)
What's Driving the Turnaround?
Apple’s revenue for Q2 2024 dipped 4% year-over-year to $90.8 billion, mainly because iPhone sales fell to $46 billion from $51.3 billion last year. But here’s the kicker: Apple’s earnings per share nudged up to $1.53, beating the $1.50 expectation. The services sector is where Apple shone, raking in a record $23.9 billion, up 14% year-over-year. This area is a goldmine for Apple, bolstering its bottom line even when hardware sales lag.
Looking ahead, Apple expects revenue to pick up in the current quarter, driven by services and a bounce back in iPad sales. Given that iPhones contribute to half of Apple’s revenue, any uptick in smartphone sales will be a big win. The global smartphone market is on a comeback, with 7.8% growth in Q1 2024, according to IDC, and AI-enabled smartphones could be a game changer this year.
AI: The Next Big Catalyst
Apple’s rumored to be diving into the AI smartphone market with iOS 18. Features like AI-powered transcripts, message summaries, and even a smarter Siri could debut soon. AI enhancements are expected to drive another upgrade cycle, and with Apple holding a 17% share in the smartphone market, this could be huge.
Should You Buy In?
Analysts are bullish. Wedbush Securities sees Apple’s AI-enabled iPhones kicking off a major upgrade cycle, upping their price target to $275 from $250—a potential 45% gain from current levels. The median 12-month price target is $202, suggesting a 6% upside.
Here’s the play: Apple’s trading at 29 times trailing earnings, which is a discount compared to the Nasdaq-100’s 31 times. With analysts revising their earnings expectations upwards and AI developments on the horizon, this might be the moment to get in before Apple starts another run.
Action Plan:
- Buy Zone: Under $195, if you’re looking for a solid entry.
- Sell Targets: Short-term around $202; long-term riding the wave towards $275.
- Watch List: Keep an eye on AI updates and quarterly earnings for quick reaction opportunities.
