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Apple's AI strategy is a lot more advanced than the Street gives it credit - Lynx

Published 2024-04-15, 09:24 a/m
© Reuters.

Lynx Equity Strategies said Apple’s (AAPL) artificial intelligence (AI) strategy “is a lot more advanced than the Street gives it credit,” reiterating a price target of $220 on the stock.

The firm said it remains bullish on AAPL based on its projections that iPhone and overall revenue will see modest growth in this fiscal year.

Analysts' comments come after the IDC data revealed that Q1 iPhone shipments fell 10% year-over-year, while overall global units rose 7.6% during the period. As a result, iPhone unit share shrank to 17%, down from 20.6% in the year-ago quarter.

“Sounds bad, right? However, the report should hold little surprise for investors. The report may even be positive for the stock,” wrote analysts.

The firm pointed out that IDC’s iPhone growth estimate aligns with the consensus, which predicted a 9% year-over-year decline in unit sales.

Meanwhile, the average selling price (ASP) is anticipated to grow by 2.6% in the first quarter. By incorporating this ASP increase into IDC’s shipment forecasts, the estimated revenue decline is projected at 7.5%, which is more favorable than the consensus estimate for a revenue reduction of 10.7%.

“IDC’s estimate of iPhone unit growth estimate of down 10% should provide a sigh of relief in the context of dreary media headlines of China units down high double-digits,” said analysts.

“Many investors appear to confuse with iPhone’s China numbers with iPhone’s global sales,” they added.

“We pointed out in a note last week that the iPhone weakness in Q1 may be related to idiosyncratic production logistics in Q1 - a planned affair at Apple (NASDAQ:AAPL) and Foxconn - and not related to negative demand surprise.”

Analysts believe that iPhone production is poised to rebound in Q2, or may have already begun recovering in March.

They expect iPhone revenue to grow 3% in fiscal year 2024, compared to consensus estimates of 1% growth.

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