In a significant boost to its stock performance, Apple shares rose 2.5% to a record high on Monday after Morgan Stanley raised its price target on the iPhone maker’s shares and designated the stock as a ‘top pick’, citing the company’s AI efforts as a major catalyst for growth.
AI as a Catalyst for Growth
To catch up with Alphabet’s Google and Microsoft-backed OpenAI, Apple unveiled Apple Intelligence last month, encouraging customers to upgrade their devices to utilize the new technology. This move is expected to significantly boost sales of iPhones and iPads.
"Apple Intelligence is a clear catalyst to boost iPhone and iPad shipments," Morgan Stanley analysts commented. The new technology is currently compatible with only 8% of iPhone and iPad devices, and with 1.3 billion Apple smartphones in use globally, the analysts predict that the company could sell nearly 500 million iPhones over the next two years.
The introduction of Apple Intelligence is a significant move by Apple to tap into the growing demand for AI-enabled smartphones. The technology allows users to experience advanced features such as intelligent search, personalized recommendations, and more efficient battery life management. With this new technology, Apple aims to enhance its position in the global smartphone market and drive sales growth.
Stock Performance and Market Impact
Apple’s shares, which have surged nearly 20% this year, reached $236.30, giving the company a market value of $3.62 trillion, the highest in the world. Morgan Stanley increased its price target on Apple’s shares from $216 to $273. The stock has an average rating of ‘buy’ with a median price target of $217 and has outperformed the S&P 500 index this year, according to LSEG data.
The market response to Apple’s AI efforts has been overwhelmingly positive, with investors optimistic about the company’s growth prospects. The boost in share price is a testament to the significant impact that AI can have on Apple’s business, particularly in driving sales and revenue growth.
Global Market Expectations
Industry analysts anticipate that Apple, alongside Samsung, will lead the global smartphone market recovery this year, driven by the excitement surrounding GenAI-enabled smartphones. Apple sold 45.2 million smartphones globally in the three months ending June, up from 44.5 million a year earlier, though its market share slightly fell to 15.8% from 16.6% in the same period, according to IDC data.
The growth of AI-enabled smartphones is expected to drive demand for high-end devices, particularly those with advanced features such as augmented reality capabilities and improved performance. As Apple continues to invest heavily in AI research and development, it is well-positioned to capture a significant share of this growing market.
Why Morgan Stanley Is Bullish on Apple
Morgan Stanley’s decision to raise its price target on Apple’s shares is based on the company’s strong fundamentals, particularly in AI. The analysts believe that Apple’s focus on AI will drive sales growth and boost the stock price. Additionally, the bank sees significant potential for Apple to expand its services segment, which is currently a major driver of revenue.
"Apple’s AI efforts are a game-changer for the company," said Morgan Stanley analysts. "We expect Apple to continue to invest heavily in AI research and development, driving growth and profitability."
The bank also expects Apple to benefit from the growing demand for high-end smartphones with advanced features such as AI capabilities. As consumers become increasingly dependent on their smartphones for various tasks, companies that can deliver seamless and intelligent user experiences will be well-positioned for success.
Conclusion
Apple’s record-high stock price is a testament to its strong fundamentals, particularly in AI. The company’s focus on investing in AI research and development has paid off, with the introduction of Apple Intelligence expected to drive significant sales growth over the next two years. As Morgan Stanley continues to tout Apple as a ‘top pick’, investors should remain optimistic about the stock’s future prospects.
Recommendations
Based on the positive market response to Apple’s AI efforts, investors may consider taking the following steps:
- Buy Apple shares at current prices, expecting a significant boost in sales growth over the next two years.
- Continue to invest in high-end smartphones with advanced features such as AI capabilities, driving demand for devices that deliver seamless and intelligent user experiences.
- Monitor Apple’s services segment, which is expected to continue growing driven by its expanding ecosystem of apps and subscriptions.
By following these recommendations, investors can benefit from the growth prospects of Apple, one of the world’s leading technology companies.