Apple’s AAPL stock surged +7% to hit a new high in the past year following the company’s announcement of a collaboration with OpenAI to incorporate ChatGPT into its flagship product range and services.
Investors are now contemplating whether it’s the right time to invest in Apple’s stock as it undertakes a bold transformation with its operating system.
Apple’s Dive into Artificial Intelligence
By entering the realm of artificial intelligence alongside tech giants like Alphabet GOOGL, Meta Platforms META, and Microsoft MSFT, Apple is enhancing Siri, its signature voice-activated virtual assistant, with AI chatbot capabilities as part of Apple Intelligence. This AI platform will be integrated into the upcoming iOS 18, powering Apple’s array of devices, including the iPhone, iPad, MacBook, and Apple Watch.
Performance & Valuation Analysis
Surging past $200 per share recently, Apple’s stock is now showing a positive performance for the year with a gain of +7%. While this trails behind the tech-heavy Nasdaq’s +15% growth, it has outpaced the benchmark S&P 500. Comparing valuation multiples, Apple’s forward P/E ratio of 29.3X sits at a slight premium to peers like Meta Platforms and Alphabet, but remains below Microsoft’s 36.3X.
According to Zacks projections, Apple’s sales are anticipated to remain flat in fiscal 2024 but are expected to rise by 5% in FY25 to $405.81 billion. In terms of revenue growth, Apple leads the pack among major tech companies, with Alphabet being the closest competitor with projected total sales exceeding $300 billion in the upcoming year.
Image Source: Zacks Investment Research
On the profitability end, Apple’s earnings are estimated to post a 7% increase this year and a further 9% growth in FY25, reaching $7.21 per share.
Final Thoughts
While the integration of Apple Intelligence and OpenAI collaboration have ignited a recent rally, it might be premature to deem Apple at a new turning point with its AI advancements. With a current Zacks Rank of #3 (Hold), investors might find better entry points once the excitement settles from these developments.
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