Apple shares rose to a new all-time high last week, briefly reclaiming its title as the world’s most valuable company. This was facilitated by the AI functions presented by the company, which are expected to stimulate mass updates of client devices. However, many analysts were skeptical about the record growth of Apple shares. In their opinion, Apple’s AI strategy does not correspond to such a sharp leap.
Revenue Growth and AI Strategy
Wall Street expects Apple’s revenue growth to pick up again in the second half of 2024, but end the year at just 1% before accelerating to 7% in 2025. The timing of Apple’s AI strategy to deliver significant revenue growth is key. The introduction of new AI features may be slower than investors want, potentially stretching until 2025. As a result, Apple’s device segment is projected to see revenue decline in the final two quarters of 2024 compared to the same period in the prior year. We’ll keep you updated on any developments regarding this timeline.
Diverging Investor Opinions
Some investors believe that Apple shares have room to grow, despite their proximity to historical highs. JPMorgan analysts this week raised their price target to $245 from $225, citing new AI features that should start the iPhone update cycle and increase profits.
At the same time, Laffer Tengler Investments CEO Nancy Tengler removed Apple from her list of recommended stocks to buy. “Other companies, such as Microsoft, Amazon, Oracle, and Broadcom, have more noticeable growth,” she said. “There are other opportunities that we take advantage of and places where the valuations are not as inflated.”
“I hope the market is right, but we haven’t seen enough to be sure yet,” said David Daglio, chief investment officer at TwinFocus Capital Partners. “I wouldn’t invest new money here. The risk reward is negative at best.”
Market Valuations and Performance
Rising valuations are a top priority for investors. Record growth in Microsoft and Nvidia shares revived the market, but also led to an increase in the price-to-earnings per share ratio. Microsoft shares trade at about 34 times forward earnings, and Nvidia at 43 times. The Nasdaq 100 trades at about 27 times forward earnings.
Despite analysts’ doubts, Apple shares were up 1.1% on Friday morning and trading at about 30 times forward earnings, notes NIXsolutions. We’ll continue to monitor and provide updates on Apple’s market performance and investor sentiment.