We recently published a list Top 10 AI stocks that investors will be talking about in October. Apple Inc. (NASDAQ:AAPL) ranks No. 4 on our list, so it’s worth taking a closer look.
Venu Krishna, head of U.S. equity strategy at Barclays, said on a recent episode of CNBC that he would not revise his year-end forecast of 5,600 for the S&P 500 because he believes the stock’s valuation is “full value.”
“If you look at what’s going on, the numbers (revenues) have been reduced significantly towards the end. Even though the revenues themselves have slowed down a bit, it’s still the big tech companies that are supporting the market. Second, seasonality comes into play. October is the weakest month, so we don’t want to get ahead of it.”
Asked if he didn’t think the market had really expanded, Krishna said that while there are some signs of market expansion, the “anchor” for the rally remains big tech stocks, which he says are only 6. He said it was just a brand name.
Beyond the debate over earnings and valuations, another factor still influencing investor sentiment is the Fed’s next move.
Wolf Research’s Stephanie Ross said on CNBC that in the latest Fed minutes released on Oct. 9, a “significant” majority of Fed officials want to cut rates by 50 basis points. However, he said a 50 basis point rate cut was “off the table” at the next meeting.
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A wide view of the Apple Store showing the range of products offered by the company.
Apple Inc. (NASDAQ:AAPL)
Number of hedge fund investors: 184
Apple Inc (NASDAQ:AAPL) iPhone 16 deliveries are slower than historical trends, but analysts say this could be due to increased supply and high-end buyers refraining from the upcoming Apple Intelligence. It suggests that there is a sex.
“The third week of our Apple Product Availability Tracker shows a trend in delivery lead times. If this trend continues, the weak lead times for Pro models in the first few weeks could be due to improved supply mix and This explains why it is simply an anomaly caused by a combination of improving supply mix.” This is due to the slow recovery of momentum from high-end consumers awaiting the release of Apple Inc (NASDAQ:AAPL) Intelligence. ,” JPMorgan analysts led by Samik Chatterjee said in a note to investors.
Shipping time for the iPhone 16 base model in the U.S. was reduced to 10 days in the third week from 17 days the previous week. However, the iPhone 16 Pro and Pro Max models remained unchanged at 23 days and 29 days, respectively. Trends in China also reflect this, with faster delivery times for the basic model but stable for the Pro version.
“Overall, while overall lead times for iPhone 16 models are still shorter than last year’s iPhone 15, the gap between the two groups (Base vs. Pro) has narrowed in the last week, and lead times for Pro models have also stabilized. “These models highlight that the initial slowdown in demand for Pro models may be correcting as the release of Apple Inc (NASDAQ:AAPL) Intelligence approaches,” Chatterjee added.
Morgan Stanley data also reflects this sentiment. “While iPhone 16 lead times as of September 27 remain lower than the past three iPhone cycles, lead times for 16 Pro/Pro Max models are now lower in all regions we track. An extended/stable and unexpectedly positive development,” the analyst noted. Led by Eric Woodring.
Interestingly, lead times for the Pro and Pro Max have increased by two days since last week, and this trend is consistent with the iPhone 12 and 13 models rather than the iPhone 14 and 15, which had reduced wait times at this stage. . cycle. “Interestingly, however, lead times for the iPhone 16 Pro/Pro Max have been extended by two days since last Tuesday, an unexpectedly positive trend, and the lead time for the better-performing iPhone 12 and 13 Pro/ It’s very similar to the trajectory of the Pro Max model,” Woodring added.
Almost every bullish case for Apple Inc (NASDAQ:AAPL) is built on the assumption that millions of people will rush to upgrade their iPhones because of its AI features.
But over the past few years, Apple Inc (NASDAQ:AAPL) has seen a long-term decline in carrier upgrade fees, especially postpaid ones. This suggests that people are holding on to their devices longer, perhaps due to economic factors, satisfaction with current technology, or the lack of exciting new features in recent models. . This trend is not good for Apple Inc. (NASDAQ:AAPL). Can Apple Intelligence break this trend? We’ll soon find out.
But the assumption that AI will cause a huge iPhone upgrade cycle is big and carries a lot of risks. Apple Inc. (NASDAQ:AAPL) trades at a forward price/earnings ratio of approximately 35 times, well above the five-year average of approximately 27 times. The company’s expected long-term EPS growth rate of 10.39% does not justify its valuation, especially when assuming iPhone upgrade cycles. Adjusting for this growth, the forward PEG ratio is 3.33, significantly higher than the five-year average of 2.38.
Columbia Contrarian Core Fund says of Apple Inc. (NASDAQ:AAPL): Q2 2024 Investor Letter:
“Apple Inc.” (NASDAQ:AAPL) – Apple ended the quarter boosted by its long-awaited AI announcement at its annual Worldwide Developers Conference (WDC), despite a drop in its stock price after its late May earnings release. We have regained momentum. At the conference, the company unveiled some of the new AI capabilities powered by Apple Intelligence that will be included in Apple products, and also announced a partnership with ChatGPT. Investors enthusiastically welcomed the announcement of Apple’s AI strategy, and the stock soared, overtaking Microsoft to become the world’s most valuable company (although this distinction did not last long). Beta testing of these new features is expected to take place later this summer, but the company hopes to convince users who’ve had the same smartphone for years to consider upgrading, and the initial promise and excitement will culminate in the upgrade cycle. This seems like a potential catalyst. ”
Overall, Apple Inc. (NASDAQ:AAPL) ranks #4 on Insider Monkey’s list. Top 10 AI stocks that investors will be talking about in October. While we see the potential in Apple Inc. (NASDAQ:AAPL), we believe AI stocks have a better chance of delivering higher returns over shorter time horizons. If you’re looking for AI stocks with more promise than AAPL, but trading at less than 5x earnings, check out our report. cheapest AI stocks.
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Disclosure: None. This article was first published Insider Monkey.
