JPMorgan analyst Samik Chatterjee shone a spotlight on Apple Inc's
While Apple Intelligence could drive the iPhone 17 cycle and Services revenue, Chatterjee insisted the bull case doesn't hinge solely on AI - Apple's premium ecosystem, margins and Services growth could carry the torch.
AI On The Horizon: The Bull Case For Apple Stock
The optimistic scenario hinges on a volume upcycle tied to the iPhone 17, launching in late 2025. iPhone shipments are forecast to climb from 230 million units in FY25 to 263 million by FY27, fueled by consumer upgrades for AI-enabled features.
"Margins remain underappreciated," Chatterjee noted, as commodity price tailwinds and vertical integration offset costs.
The analyst highlighted Services revenue, growing at a "mid-teens rate," added a potent profitability lever, accounting for 44% of total gross profits by FY27. Chatterjee projected a 9% revenue CAGR and 16% earnings CAGR, dubbing AI as a material driver for Apple's valuation multiple. "Our bull case forecasts with AI, supporting premium valuation," he said.
Apple: Bullish Outlook Even Without AI
Even if AI fails to spark a volume boom, Chatterjee underscored a resilient foundation: the iPhone "replacement rate as a percentage of the installed base is at an all-time low," limiting downside. Services growth and product gross margin improvements continue to drive aggregate margin expansion.
"Excluding AI, we anticipate that mid-single-digit revenue growth will support earnings growth in the +8% to +10% range, aided by margin expansion and share buybacks," he said.
China: The Wildcard
Chatterjee saw China as a wildcard. Improved consumer spending in that country could support upside volumes, irrespective of AI adoption, he said. Meanwhile, Apple's strategy to diversify assembly outside China, notably in India, could cushion tariff-related headwinds.
The Verdict On Apple Stock
Apple's stock might straddle a range-bound path in 2025, but Chatterjee said, "the valuation multiple is likely to remain intact until further demand data points emerges on the iPhone 17 cycle."
Whether powered by AI or old-school fundamentals, Apple seems poised to sustain its premium stature - and its investors' confidence.
