Thursday, June 20, 2024

Apple seeing iPhone stabilization ahead of WWDC: Wedbush

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Amid rising competition in the Chinese smartphone market, Apple (NASDAQ:AAPL) has tried to defend its market share, via price cuts.

That move appears to be working, Wedbush Securities said.

Recent supply chain checks indicated signs of iPhone stabilization, Wedbush Securities analyst Dan Ives said. This is particularly important, given that Apple is slated to unveil the newest iPhone — expected to be called the iPhone 16 — in September.

“Our Wedbush Tech Team’s Taiwan checks over the last week indicate April results for the Apple supply chain were 2% ahead of historical linearity while consensus remained unchanged,” Ives wrote in an investor note. “Outperforming during April was perhaps helped by inventory build ahead of China’s holidays in May and June, though we have also seen a slight lift in Chinese handset build projections for the June quarter, with healthy expectations around CQ3 builds. This adds to our entrenched view that for Apple iPhone builds we will see a lift heading into a highly anticipated iPhone 16 upgrade cycle that kicks off in September.”

Ives has an Outperform rating on Apple and increased his price target to $275 from $250.

All eyes on WWDC

Apple shares have gained more than 10% over the past month when the company reported fiscal second-quarter results that topped expectations and unveiled a huge $110B buyback.

While there is optimism that the “worst is behind” the tech giant with respect to the iPhone slowdown, investor sentiment has increased going into next month’s developer conference. There are heavy expectations that Apple will make several generative artificial intelligence-related announcements and bring the technology into its ecosystem.

For Ives, the upcoming developer conference is Apple’s most important event in a decade.

“We expect the formal announcement of a flagship OpenAI partnership will consist of an OpenAI Chatbot with exclusive features that build upon: on-device Apple [large language models]; and cloud-powered Apple LLMs along with Apple powering AI on its own high-end chips in our view,” Ives explained.

Apple also could start to lay the foundation of an AI App Store, with developers building consumer apps on the AI tech stack, Ives added.

And with the iPhone 16 set to be revealed in the not too distant future, Ives is anticipating a smartphone upgrade “supercycle,” ushered in by the numerous AI features introduced. In total, as many as 270M iPhones could be refreshed upon the announcement of the iPhone 16, Ives said.

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