Apple (NASDAQ:AAPL) has been something of a laggard in the AI game, with the perception being that the company has so far made a meal of the huge opportunity, one its tech giant peers have been quick to make the most of.
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However, it would be foolish to write off Apple so early in the AI game, especially considering its huge customer base. In fact, sizing its prospects, Bernstein analyst Mark Newman says Apple represents the “gateway to the Intelligence Revolution,” and counts 3 main reasons why it is “well positioned to reap rewards from AI.”
First, its core asset – “the most lucrative and sticky 1 billion users” – offers a huge monetization opportunity if Apple executes its AI strategy well. With 2.35 billion devices and roughly 1 billion unique users, Apple’s platform benefits from an expanding installed base, higher-than-average margins, and a brand that commands strong loyalty. And history suggests that trailing competitors in adopting new technology has not prevented Apple from ultimately outperforming them, giving it time to refine its approach to AI.
Second, Newman points out that Apple remains a “quality compounder,” consistently delivering double-digit EPS and FCF growth. Even with headwinds like a lengthening iPhone replacement cycle and muted iPhone 16 reception, Apple has maintained earnings momentum for more than eight years, a trend Newman expects to continue through 2027 thanks to its services mix and disciplined capital allocation.
Third, Apple recently cleared a key overhang when the Google DOJ remedies were resolved in its favor. While Newman concedes the strong phase of Apple’s trading seasonality has passed and the stock looks fully valued on a P/E basis, the analyst emphasizes that Apple compares favorably to its Mag 7 peers on EV/FCF to growth metrics.
“We believe that the Google remedies decision not only clears a significant downside risk, but opens the path for Apple to leverage Gemini’s AI, ruling out the most severe downside case,” Newman explained.
To this end, Newman initiated coverage of AAPL with an Outperform (i.e., Buy) rating and a $290 price target, implying 22.5% upside from current levels. (To watch Newman’s track record, click here)
Elsewhere on the Street, sentiment is more tempered. The consensus rating sits at Moderate Buy, based on 16 Buys, 15 Holds, and 2 Sells. The $245.06 average price target points to limited near-term upside, suggesting Apple may remain rangebound for now. (See AAPL stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.