Why Investors Bullishly Anticipate Continued Upside in AAPL Stock?

Despite recent challenges, Apple (NASDAQ:AAPL) continues to assert its dominance in the tech industry, with its recent earnings report offering a glimmer of hope for investors. Additionally, the unveiling of the M4 chip powering the latest iPad Pro underscores Apple’s unwavering commitment to innovation in hardware. Now, Bernstein sheds light on what it perceives as the bullish scenario for Apple’s stock.

Stock Rebounds Post-Earnings: Following its earnings release, Apple’s stock witnessed a notable uptick of nearly 6%. The company reported second-quarter earnings surpassing analyst estimates, with revenue also exceeding consensus expectations. Moreover, Apple announced an increased cash dividend per share, signaling confidence in its financial position.

China Focus and AI Opportunities: While concerns lingered over Apple’s performance in China, where sales dipped amidst heightened competition, Bernstein remains optimistic. The investment research firm views any inventory buildup in the region as cyclical rather than structural. Apple’s positive guidance for the third quarter, coupled with solid gross margins, reinforces confidence in its China business.

Additionally, Bernstein anticipates significant AI-related announcements, particularly around the iPhone 16 launch in September. These developments are expected to bolster Apple’s revenue streams through on-device AI capabilities, AI-driven search revenues, and increased App Store spending.

Regulatory Outlook and Valuation: Addressing potential regulatory hurdles, Bernstein maintains a relatively optimistic stance, downplaying the impact of ongoing legal challenges such as the Google DOJ case. The firm believes even adverse rulings would likely result in manageable outcomes, with potential revenue streams from partnerships.

Overall, Bernstein projects a bullish scenario for Apple, with an estimated earnings per share (EPS) of $8 in FY 25. They anticipate Apple’s stock to re-rate to the top end of its valuation range, reaching a share price target of $235. The potential for a robust iPhone 16 cycle, coupled with AI-driven tailwinds, underpins this outlook. Furthermore, Bernstein emphasizes Apple’s long-term valuation as reasonable, considering its strong financials and sustained growth trajectory.

Maintaining an Outperform rating and $195 price target on Apple’s stock, Bernstein underscores the positive risk/reward profile, highlighting the company’s resilience and potential for future growth.