Morgan Stanley reiterates $330 price target with bull-case $440
Nota Bene #AI #Financials · 3 comments
by Horace Dediu
AI or bust
Morgan Stanley analyst Erik Woodring believes Apple’s upcoming Worldwide Developers Conference could begin to change that perception. The 5-star analyst reiterated his Overweight rating and $330 price target, arguing that a successful AI strategy could unlock a higher valuation for Apple stock, with a bull-case scenario reaching as high as $440 per share.
He noted that Apple’s recent strength has been driven by its products and services business rather than AI. However, companies viewed as “AI winners” have often earned higher valuations over the past two years, and Woodring believes Apple could soon be seen as one of them.
Why WWDC Could Be a Turning Point for AppleWoodring believes Apple now has more of the tools needed to compete in AI. He pointed to Google’s Gemini models supporting Apple Foundation Models, Apple’s strong focus on privacy, and what appears to be a renewed push around Siri and Apple Intelligence.
Unlike many of its rivals, Apple is not spending heavily on building AI infrastructure. Instead, the company can use its massive base of iPhone, iPad, and Mac users to bring new AI features to consumers. That approach could help Apple grow its AI offerings without the huge costs faced by some competitors.The analyst also sees an opportunity for Apple to help ease some of the industry’s AI capacity constraints. A more capable Siri and improved Apple Intelligence platform could bring AI tools to millions of users through Apple’s existing ecosystem.
For investors, the bigger story may be valuation. Woodring believes that if WWDC shows a clear path for Apple’s AI plans, the stock could earn a higher multiple. In that scenario, he sees shares reaching $365 to $385, with a bull-case valuation of as much as $440.
Source: TipRanks Financial
NB: Not much new here but a $330 target is not much above the $315 high recently reached. Perhaps this is his foreshadowing of upgrades post WWDC…
…The premise is that Apple could get a higher multiple on AI re-rating. I am always skeptical of re-ratings as Apple does not respond to market fads (unless they are negative.) Apple has always been valued very conservatively, sometimes derisively so. A multiple above 40 is almost never experienced. If it were to run on AI euphoria well above that I'd be very surprised.
Disappointment after WWDC is almost guaranteed as it's always hyped by pundits expecting new strategy, new products and new directions whereas it's always been strictly a software and tools show.
3 comments
rbgayle ·
For me, what will matter is Apple's cash hoard. Because I think there may well be a major correction on AI that could affect the whole market. Apple's cash would then allow it to buy up lots of important assets cheaply. That is how J Paul Getty became very rich in the Depression. And it may be why Apple decided to handle cash differently than the last decade. Use it to buffer the turbulence and to enhance its own assets.
deemery ·
It's very interesting to me to think about AI bust scenarios. What happens if the current set of AI megascalers going public doesn't meet expected price? Or more likely, one or more suffer a price collapse in 6 months or a year when actual revenue (let alone profit) doesn't meet expectation? If nothing else, there'd likely be a glut of older GPUs on the market...
A friend sent me this: https://www.wheresyoured.at/openai-is-a-systemic-risk-to-the-tech-industry-2/ It's actually from mid April, so 6 weeks old now, an 'eternity' in AI-timescales.. I don't think the facts, or the analysis, has changed all that much.
rbgayle ·
I am seeing a lot of sticker shock as new pricing AI models hit people. All those companies pushing AI on their employees will be moving to on device/local AI ASAP. Then the megascalers will see their revenues dry up.