Potential Growth of Apple Stock: Analyst Predicts $273 Target

Many investors are viewing Apple Intelligence as a significant driver of growth in the years ahead.

Despite experiencing flat iPhone sales during the first half of the year, Apple's shares (AAPL) have risen by 22.6% year to date, slightly outperforming the S&P 500 index. This increase suggests that investors are anticipating strong growth potential as Apple prepares to launch its much-awaited Apple Intelligence update for U.S. customers this fall.

Morgan Stanley analyst Erik Woodring shared insights into the stock's future by maintaining an overweight (buy) rating and setting a price target of $273. Following a substantial rise in the stock’s value, the pressing question is whether Apple can report results that exceed expectations in the coming quarters. Achieving this could potentially elevate the stock by another 16% in the next 12 months to align with the analyst's target.

Reasons Behind Apple's Stock Increase

Several analysts have recently noted positive trends in delivery lead times for the iPhone 16. These indicators may suggest increased demand, but they do not necessarily imply a significant rise in revenue expectations for the short term. Currently, Wall Street estimates anticipate that Apple's revenue for fiscal Q4 2024 will increase by 13% year-over-year to $94 billion. This growth is expected to accelerate to 14% year-over-year in fiscal Q1 2025, ending in December.

The forthcoming artificial intelligence (AI) features associated with Apple's devices are not solely focused on boosting device sales; they also aim to enhance growth in services like App Store purchases and subscriptions. Although Apple Intelligence will be a free software update, it is expected to yield a return on investment through increased user engagement and the potential creation of new revenue-generating services that leverage this technology.

Apple's services revenue represents a critical growth driver, particularly concerning earnings growth due to the higher margins associated with app sales and subscription services. Analysts predict that Apple's total revenue will grow by 8% in fiscal 2025, with earnings projected to rise by 12%. If Apple can surpass these forecasts, the stock could reach Morgan Stanley's target within the next year.

Disclosure: The author does not hold any positions in the mentioned stocks. The Motley Fool has positions in and recommends Apple. A disclosure policy is in place.

Apple, Stock, Growth