Apple Stock Touches New Heights, But Challenges Loom Ahead
iPhone maker Apple’s AAPL stock has reached near record levels lately, showcasing a positive trend. The stock is up 27.4% this year, in contrast to the exceptional performance of NVIDIA Corp. NVDA, which has surged 198% year to date.
In recent weeks, Apple shares have gained traction. Analysts are anticipating the company to release its quarterly earnings on Oct. 31 after the market closes.
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What’s Driving the Recent Surge?
On Sept. 9, Apple introduced its iPhone 16 series along with updated models of the Apple Watch and AirPods. The iPhone 16 reflects Apple’s advancements in artificial intelligence, particularly through its new feature, Apple Intelligence. Additionally, the iPhone 16 includes an AI application named Visual Intelligence.
According to Morgan Stanley analyst Erik Woodring, lead times for iPhones—a sign of demand—are encouraging. Last month, Apple shipped 56 million iPhones, exceeding expectations by around 10%. This could contribute approximately $2.5 billion in additional quarterly revenue, as noted on Forbes. Recently, Apple also announced its first new iPad Mini since 2021, emphasizing AI capabilities.
Analyst Price Predictions
The average price target for Apple, as set by 34 analysts, stands at $245.13. This forecast ranges from a low of $184.00 to a high of $300.00, representing a potential increase of 4.31% from the closing price of $235.00 on Oct. 20.
Is Apple a Good Investment?
Investors should consider that the rollout of Apple Intelligence is progressing slowly. Although the iPhone 16 became available for purchase on Sept. 20, the full functionality of Apple Intelligence will not be launched until late October. Even then, these AI features will operate in a limited, beta mode. Analysts on Wall Street have described Apple Intelligence as “not quite ready for prime time,” indicating potential hesitations regarding its launch.
On Aug. 3, Warren Buffett’s Berkshire Hathaway (BRK.B) disclosed a dramatic 49% reduction of its stake in Apple during the second quarter, stirring discussions about the tech giant’s current standing.
Earnings Outlook
Apple’s earnings estimate for the next quarter has declined to $1.54 per share from an earlier forecast of $1.60 per share within the last month. For the entire fiscal year, the earnings estimate dropped from $6.70 to $6.65 per share.
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Should You Consider ETFs for Apple?
Given the uncertainties surrounding the successful implementation of Apple’s AI initiatives, investors may find it safer to invest through exchange-traded funds (ETFs). This diversified approach reduces specific risks associated with Apple.
Some Apple-heavy ETFs include the Technology Select Sector SPDR Fund XLK, iShares Global Tech ETF IXN, and iShares U.S. Technology ETF IYW. For those very optimistic about Apple, leveraged ETFs like the T-Rex 2X Long Apple Daily Target ETF AAPX may offer potential rewards.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
