Apple stock value rises by $112 billion after signal of AI intentions

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The stock market has seen Apple Inc. rise this year. has been punished for failing to explain where its future growth will come from. Shares rose Thursday after the tech giant took steps to respond.

Apple's decision to overhaul its Mac computer line to focus on artificial intelligence impressed investors, sending the stock up 4.3% to $112 billion in its best performance in nearly a year, Bloomberg reports. Value added.

“Any announcement promoting AI in consumer hardware could be very beneficial for Apple,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial. “However, the impact has not yet been determined.”

This will be important to assess whether this latest rally can be sustained. Before Thursday's announcement, the stock was down 15% from its record high in December, losing more than $460 billion in market value. Trading near its cheapest level in nearly a year, bargain hunters can clearly justify taking a risk on Apple's latest stab at AI relevance.

However, maintaining this momentum will depend on Apple's ability to deliver on its growth promises. For the Cupertino, California-based tech giant, this likely means bringing AI to the iPhone.

The stock rose 0.5% on Friday.

trade at discount

“We think Apple will come back,” said Daniel Skelly, head of Morgan Stanley's wealth management market research and strategy team. “It's hard to bet against some perennial winners forever.”

Apple has paid a heavy price for its recent stagnation. It has been one of the weakest performers among the so-called Magnificent Seven this year, trailing only Tesla Inc., which has made it relatively cheap.

The stock trades at 26 times earnings, according to data compiled by Bloomberg, which is a discount to megacap peers like Microsoft Corp. That's less expensive than the Nasdaq 100 benchmark, which has an average multiple of 27.

Despite the company's strong financial position and proven revenue generation, the poor performance reflects the lack of a defined AI strategy and weak trends over several quarters.

“It has all these defensive attributes like cash flow, balance sheet and buybacks,” Skelly said. “It will begin to outline more clarity and visibility around its AI pipeline, and although it may not happen this year, expectations are building for an AI-enabled iPhone. In other words, it is becoming increasingly attractive.”

hedge fund enthusiasm

JPMorgan Chase & Co. sees growing enthusiasm for Apple among hedge fund investors, as its low valuation and AI tailwinds outweigh challenges in China and the company's services business.

According to JPMorgan analyst Samik Chatterjee, who had an Outperform rating on the stock in a recent note, hedge funds are eyeing headwinds for an entry point, “adding to the opportunity for the AI ​​upgrade cycle to accelerate.”

The widespread hope for Apple investors is that AI will be the catalyst that drives growth again. Margins are tight as revenue has declined in four of the last five quarters, and analysts expect sales to decline 4.6% in second-quarter results, to be released in the coming weeks. Although this represents Apple's weakest growth in decades, the positive is that revenues are expected to gradually improve later this year.

“Investors have historically underestimated Apple's gross margins and that appears to be happening again,” Bank of America Corp analyst Vamsi Mohan wrote in a note to clients. “We see Apple's gross margins expanding significantly due to an increased mix of services across the overall portfolio,” he said.

© 2024 Bloomberg LP


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