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On Tuesday, TD Cowen analysts reiterated a Buy rating for Apple stock (NASDAQ:AAPL) and maintained a price target of $275, well above the current trading price of $201.94. According to InvestingPro data, Apple maintains a "GOOD" Financial Health Score, despite trading at premium valuation multiples. The analysts expressed optimism about Apple’s potential to capitalize on generative AI advancements in the smartphone industry.
The analysts highlighted the potential for generative AI to transform smartphones, suggesting that large language models (LLMs) could evolve into operating systems. They emphasized that Apple’s strong market position, evidenced by its massive $3.01 trillion market cap and robust 46.6% gross profit margin, provides an advantage, despite its limited progress in AI development so far.
The analysts noted that if Apple successfully integrates AI by enhancing developer integration, adopting more capable on-device models, and boosting cloud investments or partnerships, their price target of $275 could be achievable. They projected that such developments could lead to earnings power of $10 by fiscal year 2028, with a 10% compound annual growth rate from fiscal year 2024.
However, the analysts also warned of potential risks. If Apple fails to execute on its AI strategies, they foresee a risk of multiple compression, which could reduce the stock price to around $160 per share, reflecting a 20% decline from the current price of $200.
In other recent news, Apple’s financial performance has been under the spotlight with several analysts maintaining their optimistic ratings on the company’s stock. Goldman Sachs reiterated a Buy rating with a $253 price target, citing significant growth in App Store spending, which increased by 12% and 13% year-over-year for April and May, respectively. This growth surpasses the consensus estimates for Apple’s third-quarter services revenue. Evercore ISI also maintained an Outperform rating with a $250 price target, noting a 13% growth in App Store revenue in May, despite concerns over a ruling requiring Apple to allow non-Apple payment options.
JPMorgan maintained its Overweight rating on Apple with a $240 price target, focusing on the upcoming Worldwide Developers Conference (WWDC), where incremental AI advancements are expected. Citi analysts echoed this sentiment, reaffirming a Buy rating and highlighting anticipation for software updates and new features at the WWDC. The WWDC is seen as a platform for Apple to showcase its strategic positioning in AI and software integration. Meanwhile, geopolitical tensions have affected Apple, along with other major tech stocks, as they experienced slight declines amid global trade uncertainties.
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