Ahead of Apple, Inc.'s (AAPL  ) annual WorldWide Developers Conference that kickstarts on Monday, an analyst at Wedbush said a "new AI era for Cupertino begins" at the conference.

The Apple Analyst: Daniel Ives maintained an Outperform rating and $275 price target for Apple's stock, with the price target suggesting scope for roughly 40% upside potential.

The Apple Thesis: Apple will unveil its highly anticipated AI strategy at the WWDC, and this will likely kick off an AI-driven accelerated growth cycle for the iPhone and Services, Ives said in a note. The analyst views the conference as the "most important" event for Apple in over a decade, given the pressure the company is under to bring a generative AI stack of technology for developers and consumers.

The introduction of AI technology into the Apple ecosystem will bring "ample monetization" opportunities and add about $30 to $40 per share to the company's growth story, Ives said.

The WWDC 2024, the analyst said, is a new frontier for Apple, as the event will introduce AI to its developer community, which in turn will lay the foundation to bring generative AI to consumers.

Ives said he expects a formal announcement from Apple regarding its OpenAI partnership, which will comprise an OpenAI Chatbot with exclusive features that build upon on-device Apple LLMs and cloud-powered Apple LLMs along with Apple powering AI on its high-end chips.

Apple will likely announce an AI App Store, the analyst said, adding that "as more developers build apps

over the next year around AI, this activity and monetization will happen within the Apple ecosystem."

He added that the iOS 18 update will also have several additional AI features.

The analyst also looks ahead to Apple launching the iPhone 16 later this year, armed with AI features. This will likely set the company up for a renaissance of iPhone volume growth as a massive overdue upgrade cycle kicks off into 2025, he said.

Explaining the thesis behind his bullish stance, Ives said:

  • Current iPhone Street estimates for 2024 are achievable and the 2025 estimates are conservative.
  • Pent-up demand around an upgrade cycle will likely push iPhone volume to 270 million units with the launch of the iPhone 16.
  • Services business continuing to grow at a double-digit rate.
  • Strong installed base with 2.2 billion iOS devices worldwide.
  • AI opportunity not factored in by Street.
Apple Stock: At the time of writing, Apple shares were down 0.30% at $196.29, according to Benzinga Pro data.