On Thursday, Bernstein SocGen Group maintained its Outperform rating and $240.00 price target for Apple Inc (NASDAQ:AAPL) shares, currently trading near its 52-week high of $250.80. According to InvestingPro analysis, the tech giant, valued at $3.73 trillion, appears overvalued at current levels.
The company's upcoming agentic AI features are particularly significant given its strong financial health score. Apple is set to introduce these features with the iOS 18.4 update expected in April.
The new AI capabilities are designed to merge personal information and context with agentic capability to improve the utility of AI on Apple devices. The forthcoming update promises to include on-screen integration, app integration, and personal context, marking a significant step beyond the mechanical features introduced in iOS 18.2.
Despite the advancements, the industry faces challenges with agentic AI, as current state-of-the-art models only achieve a 22-25% success rate in avoiding errors, known as "hallucinations," in AI benchmarks. Apple's iPhone 16 hardware, which includes 8GB of RAM, may also limit the potential of these AI features due to relative constraints.
However, InvestingPro data shows Apple maintains strong profitability with a 46.2% gross margin and operates with moderate debt levels, providing financial flexibility for continued AI investments.
Apple has an advantage in user personal context, as it generally has access to more user data compared to Android devices. This positions the company well in negotiations with third-party app developers for data sharing. Nevertheless, there is still a risk of errors in applying personal context in a way that is both significant and low-risk for hallucinations.
The analyst suggests that the initial agentic features debuting in April might be less extensive than some enthusiasts expect, and it could take time for smartphone vendors, including Apple, to develop compelling features that gain widespread adoption. Consequently, no substantial surge in iPhone 16 sales is anticipated later in the year.
However, the firm maintains a positive outlook for the iPhone 17 cycle, anticipating it will benefit from enhanced AI capabilities and a change in form factor. This aligns with InvestingPro's forecast of 6% revenue growth in FY2025, with analysts predicting continued profitability. For deeper insights into Apple's valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
In other recent news, Apple recently reported record-breaking total revenue of $94.9 billion for the final quarter of 2024, marking a 6% growth in iPhone sales. The tech giant also announced plans to invest $1 billion in a new manufacturing facility in Indonesia.
Analysts from Citi have maintained their Buy rating on Apple, reiterating their price target of $255, following the release of iOS 18.2 that introduced significant enhancements to Apple Intelligence.
In contrast, KeyBanc Capital Markets maintained an underweight rating, while Wedbush Securities reiterated an Outperform rating, emphasizing the upcoming release of advanced AI features.
Meanwhile, MDA Space Ltd, a collaborator with Apple, is forecasted to experience over 25% growth in the coming years, according to BMO Capital Markets. This is due to MDA's robust backlog, promising pipeline, and competitive edge in the market.
Andrew Ferguson's recent appointment as the new Chair of the Federal Trade Commission indicates potential shifts in the approach towards big tech companies, including Apple. Lastly, Apple is set to introduce satellite connectivity to its smartwatches by 2025, following a significant investment in Globalstar (NYSE:GSAT). These are the most recent developments in Apple's ongoing pursuit of growth and innovation.
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