Why Apple stock popped (again) Wednesday morning

Wall Street is increasingly bullish on the iPhone maker's plans for artificial intelligence (AI).

| More on:
streaming stocks represented by woman watching tv on tablet

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Shares of Apple (NASDAQ: AAPL) turned sharply higher on Wednesday, continuing Tuesday's impressive climb. The stock added as much as 5.3% in early trading. As of 1:44 p.m. ET today, the stock was still up 4.9%.

Wall Street continues to weigh in on the iPhone maker's big artificial intelligence (AI) reveal as a part of Apple's Worldwide Developers Conference (WWDC). 

Wall Street is decidedly bullish

Apple's announcement about its plans for generative AI has been well received by investors, driving the stock higher on Tuesday. As Wall Street continued to digest the news, analysts have been weighing in on what it means for the company and its shareholders. After several upgrades and a number of price-target increases yesterday, the bullish commentary continued today.

Bank of America analyst Wamsi Mohan joined the chorus, suggesting that Apple's installed base of more than 2.2 billion devices provides insight into future demand. The analyst suggests that the debut of Apple Intelligence -- the company's suite of AI-powered features and applications -- will be the catalyst that sparks the next big upgrade cycle.

Mohan sees the replacement cycle for Apple products shrinking as its AI-related improvements give consumers a reason to replace their existing devices. And he believes Wall Street's current outlook is far too low.

I think he is on the right track. Estimates suggest that there are roughly 1.5 billion iPhones currently in use, and about 270 million of them haven't been upgraded in four years, according to Wedbush analyst Dan Ives.

The advent of Apple Intelligence and the buildout of generative AI-powered apps will likely inspire users to upgrade to the iPhone 16, which is expected to debut in the fall. This could lead to a so-called supercycle, with many iPhone owners trading up to the newest device.

Some investors saw the economic challenges as a reason to abandon Apple stock, but the company has a long track record of defying detractors. The stock currently trades at 33 times earnings, which is a slight premium compared to a multiple of 28 for the S&P 500. But over the past decade, Apple stock has gained 823%, more than four times the 180% gains of the S&P -- which illustrates why it deserves a premium. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Danny Vena has positions in Apple. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Apple and Bank of America. The Motley Fool Australia has recommended Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
International Stock News

The CEO of Nvidia just sold 700,000 shares of his company's stock. Here's what investors need to know

What could it mean?

Read more »

A man in a business suit peers through binoculars as two businesswomen stand beside him looking straight ahead at the camera.
International Stock News

Where will Nvidia stock be in 1 year?

You might be late to the party.

Read more »

asx share price boosted by us investment represented by hand waving US flag across winning athlete
International Stock News

Is it too late for ASX investors to start buying US shares?

Should ASX investors start taking the gains from US shares like Nvidia off the table?

Read more »

A US flag behind a graph, indicating investment in US shares
International Stock News

Which US shares are ASX investors buying in 2024?

The ASX's most popular US shares contain some familiar names...

Read more »

A man and a woman sit in front of a laptop looking fascinated and captivated.
International Stock News

Prediction: 2 US stocks that will be worth more than Nvidia 5 years from now

These US stocks have a shot at surpassing Nvidia over the next few years.

Read more »

Digital rocket on a laptop.
International Stock News

Is Nvidia stock going to $150 in the wake of its high-profile 10-for-1 stock split?

Wall Street analysts are reviewing their models in the wake of Nvidia's stock split.

Read more »

A woman walks along the street holding an oversized box wrapped as a gift.
International Stock News

Better megacap stock: Nvidia vs. Microsoft

Megacap stocks have ruled the year so far. Is Nvidia or Microsoft better positioned for the second half of the…

Read more »

A man casually dressed looks to the side in a pensive, thoughtful manner with one hand under his chin, holding a mobile phone in his hand while thinking about something.
International Stock News

Is Nvidia stock a buy now?

Nvidia investors are looking ahead. But there is risk in counting on things that haven't happened yet.

Read more »