Apple shares turn positive for 2024 ahead of WWDC

Apple (AAPL) shares on Monday closed in positive territory for 2024. Further gains came Tuesday after its quarterly report in early May eased investor concerns about its growth and sales in China and ahead of its annual WWDC event and expected AI announcements.

Eric J. Savitz for Barron’s:
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In a research note Tuesday, Morgan Stanley analyst Erik Woodring said that while investor expectations for WWDC are high, the company nonetheless could positively surprise the Street, “helping to unlock pent-up demand, accelerate iPhone replacement cycles and sustain recent stock performance.”

His view is that Apple has three distinct advantages over rivals when it comes to AI. It has “unique data” from an installed base of 1.3 billion users, “unmatched privacy standards,” and vertical integration of hardware, software, chips, and services, he said.

Woodring noted that WWDC historically hasn’t been a major catalyst for Apple shares, with the stock underperforming the S&P 500 by a tenth of a percentage point on average, on the day of the keynote address over the past decade. But he thinks this year could be dramatically different.

Another key to Woodring’s bullish thesis on the stock is his expectation that the new on-device AI features he is expecting Apple to launch will likely only run on newer iPhone models. His view is that the new features could be limited to phones with at least eight GBs of DRAM and the ability to run more than 35 trillions of operations per second, or TOPS, which will include the iPhone 15 Pro and Pro Max, and the iPhone 16 models coming this fall.

Woodring estimates that iPhone 15 Pro and Pro Max accounts for just 5% of the 1.3 billion active iPhone installed base, “suggesting that if Apple can truly deliver compelling new AI features that are limited to newer models,” then the September 2025 fiscal year could mark the first year of a multiyear iPhone upgrade cycle.

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