By Angela Palumbo
Apple stock has been regaining its footing after earnings, and Evercore ISI expects more gains, largely from the tech company’s most popular product.
Analyst Amit Daryanani rates Apple at Outperform with a target of $220 for the price, which implies a gain of 20% from its closing level of $182.74 on Wednesday. The stock has dropped 4.7% this year but is up 5.6% over the past 12 months.
Wall Street has been waiting to see how Apple will respond as other tech companies unveil initiatives linked to generative artificial intelligence, as well as whether it can improve its market share in China. Concern about both points has weighed on the stock, but Daryanani said in a note Thursday that “investors should not underestimate the ability of the iPhone to continue to deliver growth over the next five years.”
The iPhone is by far the largest revenue generator for Apple. It brought in $45.96 billion in sales, a bit more than half of Apple’s total $90.75 billion in revenue for the fiscal second quarter. That was slightly below analysts’ expectations and a decline from the $51.33 billion recorded in the same period last year.
Both inflation and competition against lower-priced options in China have hurt sales.
Daryanani sees the potential for a bounce back. He’s counting on sales in developing countries, higher prices, and the potential for new artificial intelligence-driven iPhones.
When it comes to developing countries, Daryanani wrote that emerging markets “prefer iPhones despite the high price point.” This opens the company up to the opportunity to expand into new areas, and “assuming the high-end market in developing countries doubles its unit share again over the next five years, this would add $50B to iPhone [total addressable market],” he said.
When it comes to prices and AI, Apple has an advantage, Daryanani wrote. Customers are more eager to buy the higher-priced Pro and Pro Max models of the iPhone, which is a positive for the company’s top line.
Customers are also awaiting potential news about an iPhone with generative AI capabilities. If this is announced at the company’s Worldwide Developers Conference in June, that could be a major positive factor for the stock.
Daryanani isn’t alone in his optimism. Wedbush’s Dan Ives is a longtime bull of Apple, with an Outperform rating and $250 price target.
“We believe the worst is in the rearview mirror for Apple and now there is a massive iPhone product cycle with pent-up demand and AI now coming to Cupertino looking out over the next 6-9 months,” Ives wrote in a note on May 6.
Write to Angela Palumbo at angela.palumbo@dowjones.com