Apple's Next Big Leap: How AI Software and WWDC Announcements Could Fuel Growth

Morgan Stanley analyst Erik Woodring maintained Apple Inc (NASDAQ:AAPL) with an Overweight rating and lowered the price target from $220 to $210.

Woodring noted a similar earnings setup to 3 months ago, as he anticipated a slight upside to March quarter revenue but a reasonably sizable June quarter guide-down vs. consensus. 

The analyst anticipated that this market would punish such a print. However, relative to three months ago, Apple’s share price is 12% lower, the valuation is 2.5x turns lower, and buy-side sentiment and positioning are more harmful.

He noted that the June quarter buy-side “Consensus” is $78.5 billion – $81.5 billion of revenue and $1.20 – $1.25 of EPS, and the following key event and catalyst following earnings will be Apple’s Worldwide Developer Conference (WWDC), where he expects new AI software features to take center stage. As a result, Woodring noted that there’s a chance Apple could see a relief rally and squeeze higher on a “better than feared” earnings report and guide. 

However, Erik remains Overweight-rated with just a 12% downside to Woodring’s $145 Bear Case valuation vs. nearly 30% upside to his new $210 price target and the anticipation for an AI-driven iPhone cycle in fiscal 2025. 

He will closely monitor the March quarter for total revenue (vs his forecast of $91.0 billion), China revenue (he has China iPhone shipments down 28% Y/Y in the fiscal second quarter), and Services revenue growth (Erik expects 12.7% Y/Y). 

Apple stock lost 11% year-to-date. Investors can gain exposure to the stock via Vanguard Information Tech ETF (NYSE:VGT) and SPDR Select Sector Fund – Technology (NYSE:XLK).

Price Action: AAPL shares traded higher by 0.70% at $166.15 on the last check Monday.

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