AAPL - Apple Faces Massive Hurdles In The AI Race

2024-06-27 15:43:51 ET

Summary

• Apple has seen a massive bullish run after the recent announcement of its AI initiatives and the deal with OpenAI.
• However, the stock is priced as if it has already delivered a “supercycle” and will be able to show strong EPS growth.
• It is very doubtful if the marketing of the next iPhone iteration as the most “intelligent” smartphone will be enough to shorten the upgrade cycle.
• Apple’s Vision Pro is already showing a massive slowdown in sales, and its Wearables segment has reported close to double-digit YoY revenue decline for the last two years.
• The forward PE ratio of 32 does not reflect the revenue slowdown in key segments, and any quarterly miss can cause a massive correction in Apple stock.

Apple’s ( AAPL ) recent AI announcement has been received very positively by Wall Street. The stock is trading as if the company has already delivered a “supercycle” leaving little room for further upside potential. At 32 times the forward PE ratio, Apple stock is trading at twice the historical average before the pandemic. Apple’s AI efforts have already hit a major roadblock as EU regulators have warned the company’s App Store will breach their rules. Apple has backtracked from rolling out its AI tech in the EU, which contributes close to 25% of its total revenue base....

For further details see: