Apple
shares are closing in on an all-time high, amid increasing Wall Street optimism that the company can return to growth in 2024 after a four-quarter run of revenue declines.
Apple is up about 50% so far this year, rising 0.5% on Friday. The company has a market value of $3.03 trillion, about $250 billion more than
Microsoft,
the second-largest public company by market capitalization. At a recent $195.19, Apple is less than 1% below its all-time closing high of $196.45 on July 31.
With the stock rallying, Morgan Stanley analyst Erik Woodring tossed a little kindling into the fire Friday, boosting his price target on the stock from $210 to $220, implying about 13% upside from recent levels. He reiterated his Overweight rating on the stock.
“We are turning more positive on AAPL shares as near-term risks are quelled and attention shifts to what could drive a recovery in fundamentals,” Woodring wrote in a research note. He said that “excitement” around “edge AI,” services and gross margin strength “reignites the bull case.”
Woodring attributes the recent rally in Apple shares to three factors, starting with “a bias toward quality megacap stocks during a period of elevated uncertainty.” Woodring also contends that strength in services and in gross margins offset the “well-known near-term iPhone unit challenges in China.” Lastly, he sees Apple becoming a key player in AI on phones and laptops.
Woodring noted that Apple shares trade for 26 times his earnings per share estimate for the September 2025 fiscal year, within the historical range of 18 to 32 times.
In the note, Woodring also walked through his views on several key Apple investor questions.
One ongoing area of concern is the U.S. Department of Justice lawsuit against Google, which is focused on the
Alphabet
unit’s billions of dollars in payments to Apple to be the default search engine on the iPhone and in the Safari web browser. While arguments in the case have been completed, Woodring says it appears the judge won’t rule until late 2024—and he sees a lengthy appeals process after that which could push out the conclusion of the proceedings to 2026 or maybe later.
Woodring thinks the most likely adverse ruling would be structural changes of the arrangement between Google and Apple that would allow Apple to continue to receive variable payments for traffic, while striking down fixed payments. The worst-case scenario, he said, would be a ruling that requires elimination of all search-related payments—that could affect 18% of estimated Apple earnings for fiscal 2026.
Apple hasn’t said much yet about AI, but Woodring thinks it is well-positioned to be a beneficiary “via its ability to lead the market on edge AI.” One possibility is that the addition of new AI capabilities boosts the company’s share of the hardware market and accelerates the replacement cycle. He also sees benefits to the company’s services businesses, including the App Store. And he thinks Apple could launch a premium AI-powered version of its Siri voice interface.
On China, Woodring noted that there’s been a rise in consumers switching to Huawei phones, but contends that the dynamic is well understood by the financial markets. He projects flat fiscal 2024 iPhone units from a year ago, including a 24% drop in China. But he also thinks a mix shift to higher priced units is underappreciated.
As for the pending launch of the Vision Pro mixed reality headset, Woodring said 2024 sales will be modest, but he thinks there is longer term potential; he thinks the keys to success will be the emergence of new use cases—and the launch of headsets less expensive than the initial units, which are priced at $3,499.
Write to Eric J. Savitz at [email protected]
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