Much of the anticipated upside from Apple 's artificial intelligence strategy may already be priced into the stock, according to MoffettNathanson. Analyst Craig Moffett initiated coverage of the iPhone maker on Monday with a neutral rating and $211 price target, arguing that while Apple is poised to win the AI race, the news is already accounted for in its share price. The MoffettNathanson target implies about 7% downside from Friday's close.
"We fully expect that Apple's well-crafted AI strategy will drive a substantial upgrade cycle," Moffett wrote. "We further expect that AI will eventually underpin a paid-for digital assistant, giving yet another boost to their ultra-high-margin Services business. But all of that, and then some, is already in Apple's stock price.
" Apple rolled out its AI strategy, dubbed "Apple Intelligence," as investor concerns mounted that the largest U.S. company by market value was falling behind competitors in the AI race.
Now, many analysts believe the rollout later this year could fuel an unprecedented upgrade cycle for Apple's products, especially iPhones. Moffett compared the company's AI strategy to the "perfect storm" 5G upgrade cycle in 2021 and 2022, noting that Apple entered that stage at a lower price-to-earnings multiple than today. Interest rates were also substantially lower at the time, meaning Apple requires a "significantly higher" growth rate to attain a similar multiple today, he added.
"Taken together, these two valuation observat.