Apple | Fundamental Analysis

Apple has reclaimed its position as the world's most valuable company, largely driven by excitement surrounding its advancements in artificial intelligence (AI) and the upcoming iPhone releases, which will leverage these new AI features. Earlier this year, the tech giant regained its top spot thanks to enthusiasm for its Apple Intelligence platform and the next generation of iPhones, pushing the stock higher.

Although Apple initially lagged behind some of its “Magnificent Seven” peers in the AI race, the company has a significant advantage with an installed base of over 2 billion devices. This massive hardware presence puts Apple in a prime position to ensure widespread adoption of its generative AI tools, as it controls many of the devices that will bring these innovations to consumers.

While the Apple Vision Pro headset, launched earlier this year, has failed to generate much excitement, investors are now focused on Apple’s latest breakthrough - Apple Intelligence. This AI-powered technology offers features such as image generation, customizable emojis, a writing assistant for proofreading and rewriting, email and audio transcription summaries, and an improved Siri. Set to launch in beta this October, Apple Intelligence is expected to be one of the company’s most significant software upgrades.

As for iPhone 16 sales, reports have been mixed, but Apple is not expected to release official figures until the end of October, and even then, only partial data will be available. Apple is not directly monetizing Apple Intelligence but instead hopes that the new technology will fuel demand for its devices, with iPhone 16 sales being a key barometer of interest in the new AI features.

Despite facing an antitrust investigation from the Department of Justice, Apple’s services division continues to show strong potential for growth, much like other tech giants under similar scrutiny.

This year, Apple’s stock has surged, now trading at its highest price-to-earnings ratio in a decade, apart from a brief spike during the pandemic. Valued at a staggering $3.5 trillion, Apple continues to defy expectations, finding new avenues for expansion despite being considered a mature business.

However, even though Apple’s earnings per share (EPS) rose 11% in the June quarter, driven by higher margins and share buybacks, its overall revenue growth has remained sluggish, increasing by just 5% to $85.8 billion. This modest revenue boost contrasts with the stock’s high valuation, making Apple appear overvalued given its relatively slow EPS growth.

Given the current price surge, lofty valuation, and uncertainties surrounding the impact of Apple Intelligence, the stock may see a correction if iPhone 16 sales fall short of expectations. While long-term investors have historically benefited from holding Apple shares, the current market environment suggests waiting for a pullback could be a more prudent strategy, at least until there’s solid evidence that Apple Intelligence is delivering meaningful results.

As long as the price is above 220.00, follow the recommendations below:

If the level of 220.00 is broken-down , follow the recommendations below: