Is Apple Stock Heading to $273? Analyst Sees Potential Growth with Apple Intelligence

Investors are viewing Apple Intelligence as a key factor for growth in the years ahead.

Even though iPhone sales have been flat for the first half of the year, Apple (AAPL -0.13%) has seen its stock price increase by 22.6% year to date, slightly outperforming the S&P 500 index. This rise suggests that investors are optimistic about the company’s growth prospects, particularly with the upcoming Apple Intelligence update that is expected to launch for U.S. customers this fall.

Morgan Stanley analyst Erik Woodring has also expressed confidence in the stock, maintaining an overweight (buy) rating with a target price of $273. Given the recent gains in the stock price, the question now is whether Apple can deliver better-than-expected results in the upcoming quarters to support a further increase of 16% over the next year and reach that price target.

Reasons for Apple's Stock Increase

Some analysts have noted positive trends in delivery lead times for the new iPhone 16 model. Longer lead times typically indicate stronger demand for a product, which may bode well for Apple. Currently, Wall Street anticipates that Apple's fiscal Q4 2024 revenue will grow by 13% year over year to approximately $94 billion, and this growth is expected to accelerate to 14% year over year by fiscal Q1 2025.

The anticipated introduction of new artificial intelligence (AI) features is set to influence not only device sales but also boost services revenue through increased App Store purchases and subscriptions. While the Apple Intelligence update will be free for users, the company is expected to see a return on investment from heightened engagement and the development of new service offerings that leverage this technology.

Apple's services revenue has been a crucial driver of growth for the company, particularly due to the higher margins associated with app sales and subscriptions. Analysts forecast that Apple's overall revenue will rise by 8% in fiscal 2025, with earnings expected to increase by 12%. If Apple exceeds these predictions, the stock may indeed reach Morgan Stanley's target price within the next year.

John Ballard has no stake in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool adheres to a disclosure policy.

Apple, Stock, Investment