apple (Nasdaq: Apple) Stock finally Join the Artificial Intelligence (AI) race..
Advertise your association with OpenAI Earlier this month, the iEverything giant said it would integrate ChatGPT AI into future high-end models of the iPhone, iPad, and Mac. The stock price rose nearly 9% in response to the news, and according to Bernstein Wealth Management, Apple could be worth more than that.
On Friday, Bernstein raised her price target for Apple shares to $240 per share, implying a 15% price increase over the next 12 months.
Is Apple stock a buy?
Bernstein sees four ways Apple can benefit from the AI megatrend:
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Since older iPhones won't be able to run on-device AI, people will need to buy newer, more expensive Apple devices. For every 1% acceleration in the upgrade cycle, Bernstein calculates that Apple's revenues will grow by 1.8%.
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Apple should be able to grow high-margin ad revenue from AI searches on these new iPhones.
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AI apps downloaded on these new iPhones will generate high-margin app sales.
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With Apple acting as the gatekeeper for these apps, it will generate commission revenue on e-commerce using these apps.
So far, so good. But here's where Bernstein's Apple logic gets weird.
Bernstein raised its price target by $45 to a new target of $240, and continues to recommend Apple buy at $209 per share. Granted, Bernstein's old target was only $195, so that was it king To raise the target price somewhat to justify recommending the stock. But Bernstein admits that even at its current share price of $209, Apple shares are “not really cheap anymore.”
And Bernstein is right. Apple stock is already worth more than 32.5 times trailing earnings, and 32.5 times free cash flow as well. But most analysts see its profits growing slower than 12% annually over the next five years, even with the support achieved by Apple Intelligence – assuming this support is achieved.
Bernstein is right that Apple stock is expensive. It is a mistake to tell investors to buy Apple stock at this time.
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Rich Smith He has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has Disclosure policy.
Will Apple stock reach $240? 1 Wall Street analyst thinks so. Originally published by The Motley Fool