This week kicked off with major news for Apple (AAPL) as the company held its annual fall product launch on Monday. The highlight of the event was the introduction of the AI-powered iPhone 16. Apple, based in Cupertino, California, outlined the hardware improvements and new product features while also revealing the pricing for the latest device. The iPhone 16 series introduces key upgrades like the new Camera Control button on all models for instant photo and video capture, longer battery life, and the Action button replacing the Mute/Ring switch. The iPhone 16 Pro and Pro Max feature bigger screens with improved 48-megapixel ultra-wide cameras. The latest iPhone also didn’t see price increases with the iPhone 16 starting at $799 while the iPhone 16 Pro starts at $999.
In addition to unveiling the new iPhone 16 models, Apple also introduced their latest Apple Watch lineup and new AirPods wireless earbuds. A major highlight was the demonstration of Apple Intelligence, the company’s new initiative in the artificial intelligence space. While the presentation generated excitement among some investors, many Apple customers and stockholders were disappointed by the announcement of delays. The iPhone 16 models will be available on September 20th, but Apple Intelligence won't be fully accessible until the following month. Initially, it will launch in a "beta" or testing mode, meaning users will experience it in its early stages of development with possible limited capabilities. This initial launch of Apple Intelligence will be available as a software update for the new iPhones, iPads, and Mac computers. Although this somewhat negative client note might raise concerns among investors, it is somewhat balanced by Martin's continued positive outlook on Apple stock. She still rates it as a buy, with a price target of $260, suggesting a potential increase of over 18% from Apple's closing stock price on Tuesday.
Additionally, Patrick Seitz from Investors Business Daily reported, “The staggered rollout of Apple Intelligence ‘could dampen excitement’ for the new smartphones, Piper Sandler analyst Matt Farrell said in a client note Tuesday. ‘We acknowledge it is still early in the AI journey, but we continue to be unsure if the current offering moves the needle for most users,’ Farrell said. He rates Apple stock as neutral with a price target of 225. The lack of specifics around the timing of the release of Apple Intelligence was the ‘key missing element’ from Monday's presentation, JPMorgan analyst Samik Chatterjee said in a report. Still, the upgrades to the iPhone and Apple wearables were generally positive, he said. Chatterjee rates Apple stock as overweight with a price target of 265.”
While the delayed timing of Apple Intelligence prompted several analysts to release unfavorable comments, many others praised the company for the positive aspects of the product launch. Ben Reitzes from Melius Research maintained a buy rating on Apple, setting a price target of $265. He highlighted Apple's strategic decision to keep the pricing steady for the iPhone 16 compared to the iPhone 15, noting that this move reflects the company's savvy approach in a competitive market. He said, “It demonstrates how Apple is looking at the total economics of the iPhone — a device that drives higher margin services because of the new software.” Further supporting the positive outlook, Evercore ISI analyst Amit Daryanani described the new iPhones as “solid upgrades” that could lead to a more successful upgrade cycle for Apple.
Notably, Wedbush Securities analyst Daniel Ives set a new outperform price target of $300, up from his previous target of $285, following the product launch on Monday. This elevated price target reflects his confidence in the company’s prospects despite the delays with Apple Intelligence. He said, “The new era of personalization and how consumers interact with their iPhones has now begun and we believe this will cause a renaissance of iPhone growth (high-single-digit growth upside) for Apple over the next 12 to 18 months and drive shares higher with a $4 trillion market cap in 2025.” This is a bold statement by Ives, with a price target of $300 representing a potential 36% growth from Apple's current stock price. Achieving a $4 trillion market cap would further solidify the tech giant's dominance in the industry. Currently, Apple, as the leading smartphone manufacturer, accounts for 10.3% of the Nasdaq and has a notable market cap of $3.347 trillion.
Another significant development for Apple that emerged on Tuesday was a final decision requiring the company to pay back taxes to Ireland. The European Court of Justice ruled against Apple in its long-running legal dispute over taxes in Ireland, concluding a case that began in 2016 when the European Commission ordered Ireland to recover up to €13 billion ($14.4 billion) in back taxes from the company. Despite Apple's argument that it fully pays taxes in accordance with international laws, the court's decision obliges Apple to pay a one-time tax charge of $10 billion in the fourth quarter of 2024. This charge represents a notable hit to Apple’s cash reserves and contributed to a drop in the stock price, which fell by 0.36% by the end of the day. During intra-day trading, the decline was even more pronounced, exceeding 1% in early trading.
While discussing these recent developments, it’s important to recognize that they also have broader implications beyond Apple itself. Apple's iPhone 16 release is expected to significantly benefit several key component suppliers, particularly Cirrus Logic and Broadcom, according to analysts at KeyBanc Capital Markets. Cirrus Logic is poised to gain from its components being used in camera upgrades, including the tetraprism lens design in both the iPhone 16 Pro and Pro Max models, as well as haptic drivers for the new camera control button and controllers for the Ultra Wide cameras. Broadcom will see a sales boost from Apple's decision to upgrade all iPhone 16 models to Wi-Fi 7.
Additionally, Analog Devices is expected to benefit from likely providing the force sensor for the camera control button, while Qualcomm stands to gain from increased radio-frequency chip content, overtaking Skyworks Solutions in this area. KeyBanc has rated Cirrus Logic, Broadcom, Analog Devices, and Qualcomm as "buy," while Skyworks holds a neutral rating. Furthermore, Taiwan Semiconductor Manufacturing (TSMC) is producing the A18 and A18 Pro chips for the iPhone 16, utilizing advanced 3-nanometer technology. Investors in Apple and its key component suppliers should closely monitor how the iPhone 16 upgrade cycle influences each company’s upcoming earnings reports. These reports will be crucial, as they can significantly impact stock prices and market movements for both Apple and its suppliers.
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