Apple (AAPL) Could be an “A.I. Winner”

Schwab Network
3 Apr 202405:21

TLDRApple's stock price has seen a healthy increase despite facing various challenges including antitrust issues and concerns over iPhone sales. The company's year-to-date performance has been remarkable without significant contributions from Apple. Recent positive news includes a 13% increase in App Store revenue in March and a research paper suggesting Apple could be an AI winner once it addresses on-device AI capabilities. Analysts have mixed views on Apple's future, with some predicting a strong upside potential, while others remain cautious due to the company's dependency on iPhone sales and the changing consumer behavior towards the product.

Takeaways

  • 📈 Apple's stock price increased by 8/10 of 1% during the session, showing a positive movement.
  • 🔍 Every major tech analyst seems to cover Apple, highlighting its significance in the market.
  • 🏆 Despite not being the biggest stock currently, Apple has been a market leader for years.
  • 📊 The S&P and NASDAQ performance has been strong year-to-date without significant contribution from Apple.
  • 🚀 Apple's year-over-year growth reached 2%, recovering from a previous decline of 11.5%.
  • 💡 Positive news flow on Apple is noteworthy, considering the generally negative press it has received lately.
  • 📱 App Store revenue increased by 13% in March, a promising sign for the company's growth.
  • 📊 Q1 revenue growth was reported across all categories, including services, lifting overall growth to about 13%.
  • 🔮 Apple's AI research suggests potential for the company to be a major player in the field once certain challenges are overcome.
  • 📱 The company's new language model, 'reference resolution', shows competitive performance with other leading AI models.
  • 🎯 Despite the positive outlook, the discussion indicates that this is more of a long-term strategy rather than an immediate catalyst for growth.

Q & A

  • How did Apple's stock perform during the session mentioned in the transcript?

    -Apple's stock made a nice move, recovering from being lower earlier in the session and closing with a healthy increase of 1%.

  • What is the significance of Apple's stock performance in relation to the S&P and NASDAQ?

    -Apple's stock performance is significant because it has contributed to the overall market performance, despite facing challenges and negative news flow. Its year-to-date performance has been impressive, with a 2% increase year-over-year.

  • What are some of the challenges Apple is facing according to the transcript?

    -Apple is dealing with antitrust issues, navigating the European market, concerns in China, and domestic concerns in the US, particularly related to iPhone 15 sales.

  • How did Apple's App Store revenue perform in March according to the transcript?

    -Apple's App Store revenue increased by 13% in the month of March, which helped alleviate concerns about the company's growth.

  • What does the transcript suggest about Apple's revenue growth across different categories?

    -Apple has recorded revenue growth across all categories, including services, which has elevated its overall growth to about 13% for the quarter ending March 31st.

  • What is the potential impact of Apple's AI research on its future products?

    -Apple's AI research suggests that the company could be a winner in the AI space once it solves the issue of having on-device AI capabilities. This could enable devices like iPhones and PCs to provide the same functions as AI in data centers.

  • What is the outlook for Apple's App Store growth?

    -The strength of Apple's March performance increases confidence that the company can maintain double-digit growth in its App Store revenue.

  • What is the opinion of the analyst mentioned in the transcript regarding Apple's stock price target?

    -The analyst, Dan Ives, has a price target of $250 for Apple, which implies a potential upside of around 60% based on the current prices.

  • How has the iPhone's role in Apple's revenue changed according to the speaker in the transcript?

    -The iPhone now accounts for 50% of Apple's revenue, and its role has transitioned from a discretionary product to a necessity for many consumers. However, the growth cycle of iPhones has changed, and overall sales have slightly stagnated.

  • What does the speaker suggest about the consumer behavior towards iPhones?

    -The speaker suggests that consumer behavior has shifted, with people no longer feeling the need to upgrade to the latest iPhone model as they did in the past. Instead, they may only replace their phone if it breaks or stops working.

  • What is the speaker's view on the importance of Apple's subscription services?

    -The speaker feels that Apple's subscription services are becoming increasingly important, as they have multiple subscriptions through Apple, although they are not entirely sure of what they are paying for.

Outlines

00:00

📈 Apple's Market Performance and AI Potential

This paragraph discusses Apple's recent market performance, highlighting its recovery from lower points to a significant increase in stock value. It emphasizes the extensive coverage of Apple by tech analysts, reflecting its importance in the market. The discussion also touches on the year-to-date performance of the S&P 500 and NASDAQ, noting Apple's substantial contribution despite past challenges. The segment further addresses the positive news flow regarding Apple, countering previous negative narratives with a focus on the company's app store revenue growth and its overall revenue growth across all categories. Additionally, the conversation delves into a recent research paper from Apple on AI, suggesting the company's potential to be a major player in the field once it overcomes certain challenges. The discussion concludes with an analysis of Apple's price targets and potential market behavior, considering different investment scenarios.

05:00

📱 Changing Consumer Behavior and Subscription Services

The second paragraph shifts focus to consumer behavior and Apple's subscription services. It starts by discussing the transition of iPhones from a high-growth product to a more stable, essential item for consumers, reflecting a change in the market dynamics from the previous years. The speaker shares a personal anecdote to illustrate this shift in consumer attitude, where the urgency to upgrade to the latest iPhone model has diminished. Additionally, the paragraph touches on the variety of Apple's subscription services, creating a sense of ambiguity for the consumer in terms of the number and cost of these services. This part of the discussion underscores the evolving nature of Apple's product offerings and consumer interaction with the brand.

Mindmap

Keywords

💡Apple

Apple Inc. is a multinational technology company that designs, manufactures, and sells consumer electronics, software, and online services. In the context of the video, Apple is noted for its stock performance, with a significant focus on its year-to-date gains and its contributions to the overall tech market.

💡S&P 500

The S&P 500, or Standard & Poor's 500, is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on stock exchanges in the United States. It is a widely recognized benchmark for the U.S. stock market and serves as a proxy for the overall performance of the market. In the video, the performance of the S&P 500 is discussed in relation to Apple's contributions.

💡NASDAQ

The NASDAQ, or National Association of Securities Dealers Automated Quotations, is an American stock exchange that focuses on technology and electronics-based companies. It is the largest electronic screen-based equity securities trading center in the U.S. and one of the most significant trading platforms in the world. The video references the NASDAQ to discuss the overall performance of the tech sector, with Apple being a significant player in this index.

💡Antitrust

Antitrust laws are designed to promote competition for the benefit of consumers, preventing anti-competitive practices that could lead to price-fixing, monopolies, and other forms of market manipulation. In the context of the video, Apple is facing antitrust issues, which could potentially impact its business practices and market position.

💡App Store

The App Store is a digital distribution platform developed and maintained by Apple for its iOS and macOS devices. It allows users to browse and download software applications for their devices. In the video, it is highlighted that Apple's App Store revenue increased by 13% in March, indicating a positive financial performance in this segment.

💡AI

Artificial Intelligence (AI) refers to the development of computer systems that can perform tasks typically requiring human intelligence, such as visual perception, speech recognition, decision-making, and language translation. The video discusses Apple's potential as an AI winner, with a focus on its new language model and its implications for future growth.

💡Revenue Growth

Revenue growth is a financial metric that indicates the increase in the income generated from the sale of goods and services by a company over a specified period. In the video, Apple's revenue growth across all categories, including services, is emphasized, showing the company's financial health and its ability to expand its market presence.

💡iPhone

The iPhone is a series of smartphones designed and marketed by Apple Inc. It has become one of the most iconic consumer technology products globally. In the video, the iPhone is discussed in the context of Apple's business challenges, noting that the growth cycles of iPhones have changed and sales have stagnated slightly, which could impact the company's overall revenue growth.

💡Supercycle

A supercycle refers to a prolonged period of significant growth or expansion in a particular market or industry. In the context of the video, it is suggested that Apple could potentially trigger a supercycle with the iPhone, particularly if it can solve the issue of on-device AI capabilities, which would make its devices more competitive and desirable.

💡Mega Bull

A mega bull is a term used to describe an investor or analyst who has a very optimistic outlook on the market or a specific stock, predicting significant price increases. In the video, Wedbush Securities and Dan Ives are mentioned as being mega bulls on Apple, with a high price target reflecting their positive view on the company's future performance.

💡Underperformer

An underperformer in the financial context refers to a stock or security that has shown less favorable returns compared to others in the same market or index. In the video, Apple is described as an underperformer, suggesting that despite its strong revenue growth, it has not met the high expectations set by some market analysts.

Highlights

Apple's stock price increased by 8/10 of 1%, showing a positive movement in the market.

Despite negative news flow, Apple's stock performance remains significant, with a 2% increase year-over-year.

Apple's app store revenue increased by 13% in March, which is a positive sign for the company's financial health.

Apple recorded revenue growth across all categories, including services, with an overall growth of about 13% for the quarter ending March 31st.

A recent research paper from Apple suggests that the company could be an AI winner once it solves the issue of on-device AI capabilities.

Apple's new language model, known as reference resolution, shows potential for similar performance to open AI's GPT-4.

The research indicates that Apple's AI model could enable an iPhone supercycle, which is a long-term goal for the company.

Analysts have mixed opinions on Apple's stock, with Wedbush and others setting a price target as high as $250, indicating a potential 30% upside from current prices.

Apple's iPhone sales face challenges due to market saturation and changing consumer behavior.

The iPhone has transitioned from a discretionary product to a necessity for many consumers, indicating a shift in the market dynamics.

Apple's subscription services are growing, with many consumers unaware of the extent of their spending.

The discussion highlights the importance of paying attention to the news and its impact on stock performance.

The transcript emphasizes the need to consider long-term strategies and potential turnarounds for companies like Apple.

The conversation touches on the potential for a rotation out of current winners and into underperforming names like Apple, which could have a turnaround brewing.

The transcript underscores the importance of revenue growth across all segments for Apple, despite the challenges faced by the iPhone.

The discussion points out that while projections and expectations are important, the current state of Apple's major product, the iPhone, is a key factor to consider.

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