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Apple (AAPL) is in a difficult situation in 2024. The company’s stock price has fallen about 7% since the beginning of the year. iPhone sales are slowing in China, the third largest market. And the European Union’s competition watchdog, the European Commission, recently slapped the tech giant with a $2 billion antitrust fine, among other regulatory headwinds. Apple says it will appeal. Oh, and the Department of Justice is also reportedly preparing its own antitrust case against the Cupertino-based company.
These headlines are painful enough to hurt any company. But Apple is more than just a company. The company is her second most valuable publicly traded company after rival Microsoft, and worldwide it has an installed base of 2.2 billion active devices.
And at least two Wall Street analysts say the company has other levers to keep it performing well in the coming months, including its potential in the generative AI space and its ability to tap into its large user base. They have some prepared. Goose subscription sales.
Generative AI could be a boon
Wall Street is obsessed with all things generative AI. And while Nvidia and Microsoft seem to be the biggest beneficiaries of the market’s love for this technology, Apple could also benefit a lot from his AI explosion.
“We think [Apple’s] AI strategies focus on incorporating on-device inference. [large language models] This significantly improves the user experience for iPhone as well as Mac/iPad,” Evercore ISI analyst Amit Daryanani wrote in a recent investor note.
It could also encourage people to buy new devices. “Given their vertical integration, especially their control over their own silicon; [Apple] In addition to widening the moat surrounding the iOS ecosystem, we are also in the best position to potentially drive faster update cycles should the final implementation be deemed a sufficiently significant change. ” he added.
Apple is widely expected to announce a new version of its iOS operating system during June’s WWDC event. The company hasn’t disclosed anything about what it has in store, but CEO Tim Cook said the tech giant is working on something the company is “incredibly excited about.” He said there was.
For years, Apple has built neural engines that help run AI applications into custom chips that power its iPhone, iPad, and Mac product lines. And that could give the company an edge when it comes to developing on-device generated AI software. On-device AI software makes generative AI programs more accessible and more secure by eliminating the need to share data over the web.
Service is still the winner
Apple’s large installed base of 2.2 billion devices also means there is significant opportunity to continue growing its services business. Over the past three years, Apple’s annual services revenue, which includes Apple TV+, AppleCare, and Apple One subscriptions, has increased from $68.4 billion in 2021 to $78.1 billion in 2022 and $85.2 billion in 2023. did. And analysts say the number will continue to rise. Runway.
Daryanani said growth in Apple’s services is “underestimated” and “growth is expected to be in the low-teens range.” [fiscal 2024]”
BofA Global Research analyst Wamsi Mohan offered a similar assessment of Apple’s services business, saying in a research note that he expects “services monetization to continue to increase.” [revenue] For each installed base device. ”
Apple makes people pay more
But one of Apple’s biggest strategies is its ability to keep making people cough more and more for the iPhone. The company has achieved this by rolling out its high-end Pro series phones and equipping them with unique features such as better cameras and, more recently, more powerful processors. The promise of better features will encourage users to step up to the more expensive Pro device compared to the standard iPhone.
Coupled with last year’s decision to sell iPhones at discounted prices, Wamusi said Apple could scrape together cash even in a year of weak iPhone sales. And that’s especially important now, as Apple’s sales in China have taken a hit.
“Despite weak unit sales, Apple has been able to make its unit mix more valuable, and we believe this will continue as a long-term trend, resulting in “It could offset some of the potential unit weakness in China.”
So, while the first half of 2024 will be a difficult time for Apple, the company still has a lot to do and nine months to turn things around.
Daniel Howley I’m the technology editor at Yahoo Finance. He has been covering the technology industry since his 2011. You can follow him on Twitter. @Daniel Howley.
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