Bank of America recently asserted that Apple (AAPL) on June 22 had unveiled “a material positive reset of its AI strategy.” While Apple’s new strategy does appear to be superior to its previous approach to AI, it’s difficult to see how the change will significantly boost the company’s top or bottom lines.
Meanwhile, the huge, recent increases in flash-memory prices could cause the company’s growth to meaningfully decelerate going forward.
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In light of these points, along with Apple’s valuation that is not especially attractive and the performance of AAPL stock over the last few years, I do not expect the name to meaningfully outperform the Nasdaq ($NASX) in the next 12 months.
About AAPL Stock
Primarily due to the iPhone’s popularity and its high gross margins, Apple is one of the most profitable companies in the world. In the 12 months that ended in September, it generated income of $112 billion. Consequently, its market capitalization, which stands at about $4.36 trillion, is huge.
The tech giant’s trailing price-earnings ratio of 36 is somewhat elevated, given the challenges that it faces.
Bank of America’s Take
According to Bank of America, Siri has been “repositioned as a context-aware, multimodal, cross-app assistant embedded across the Apple ecosystem.” Additionally, the assistant “combines personal context understanding, onscreen awareness, broad world knowledge, and systemwide app actions,” potentially making it superior to “generic assistants,” the bank contended.
It kept a $380 price target and a “Buy” rating on the shares.
Why Siri Probably Won’t Move the Needle for AAPL Stock
The principal way that AI could positively move the needle for AAPL is if its technology spurred more consumers to buy iPhones. But in all probability, the latter phenomenon will not occur. That’s because the new Siri is actually powered by Alphabet’s (GOOG) (GOOGL) Google Gemini models. Since Android smartphones also use Google’s technology, it’s almost definitely providing the same or better AI capabilities to high-end Android models. Therefore, iPhones’ market share is unlikely to meaningfully increase as a result of Siri’s upgrades.
