2 reasons Apple's stock still has 25% upside despite struggling to start 2024, according to JPMorgan

Filip De Mott
The Apple logo on a store.
Fernando Gutierrez-Juarez/Getty Images

  • JPMorgan holds a $210 price target on Apple, citing improving sentiment among investors.

  • Enthusiasm is growing amid anticipation of an AI-led upgrade cycle that could boost sales.

  • Apple's stock plummet is also making its valuation more attractive.

Apple's 2024 has been a struggle so far, as deteriorating data points have cut into its market performance. But according to JPMorgan, it isn't deterring enthusiasm among hedge fund investors, who are holding out for future upside.

The reasons? An AI-led iPhone upgrade cycle, and a moderating valuation premium, the bank outlined.

These same factors are behind JPMorgan's own bullishness, holding a price target of $210 per share. That represents a 25% gain from current levels, with Apple trading at $168.71 as of 9:20 a.m. ET.

First, rising investor appetite for Apple is chiefly coming from expectations of an AI-driven boost, similar to how the 5G upgrades helped shares skyrocket in 2020.

As with 5G, the introduction of on-device AI upgrades would likely ramp up the phone replacement cycle for 2 to 3 years, as the technology is expected to be only available on newer generation phones, JPMorgan said.

The bank expects iPhone 17 to be Apple's first "AI phone," scheduled to come out September 2025.Due to this, JPMorgan anticipates 2026 iPhone volumes to accelerate to 240 million units.

"The product cycle will drive an inflection in the revenue and earnings growth in our estimate to 14% and 21% in FY26, respectively, relative to expectations for more muted outcomes in FY24 and FY25," the note said.

This puts JPMorgan's earnings forecast 7% ahead of consensus.

Second, the fact that Apple has slid 13.3% year-to-date means that it's now trading at the lower end of a range of multiples, as seen during the 5G cycle momentum.

"Contrary to the deterioration of fundamentals relative to both Hardware demand as well as outlook for Services growth, the interest in AAPL shares have improved from the broader group of investors who have otherwise been averse to the premium valuation multiple despite one of the lowest growth outlooks relative to the other Mega Cap Tech stocks," JPMorgan wrote.

Despite increased 2026 estimates, the bank continues to expect downside risks in the near-term for Apple. The company has been burdened by competitive pressures out of China and increasing regulatory scrutiny.

Read the original article on Business Insider

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