JPMorgan sees near 20% upside left in Apple stock through 2025

Investing.comJul 24, 2024 10:34 AM

JPMorgan (NYSE:JPM) analysts set a new December 2025 target for Apple (NASDAQ:AAPL) stock at $265, compared to the previous December 2024 target of $245. Relative to the current share price, the new price objective implies a potential upside of around 18%.

The move comes ahead of Apple’s upcoming quarterly report for the fiscal third quarter.

Analysts said they expect investors to start looking beyond 2024 and see AAPL as “well positioned to drive higher confidence from the upcoming earnings print relative to the shares representing a solid “Edge AI” play heading into the upcoming fiscal years.”

JPMorgan believes the iPhone maker will reassure investors that the upcoming AI replacement cycle, set to begin in earnest in fiscal 2025 and further accelerate into fiscal 2026, is leveraging a more robust launchpad in FY24. This is supported by better-than-expected revenue drivers for both iPhone and the company as a whole.

Analysts project that Apple will beat revenue expectations, driving earnings per share (EPS) upside and likely leading to consensus revisions for full-year earnings. This, in turn, should help ease investor concerns about Apple's premium valuation multiple, analysts added.

Despite Apple's strong performance over the past couple of months, the stock has only matched the broader market's year-to-date performance.

“However, we see room for that to change once we take into account the upcoming earnings print, and the likely positive revisions to iPhone 16 volumes from the supply chain following the launch, which we expect to act as a catalyst to drive the shares higher than its prior peak multiple of 31x during the 5G cycle,” the bank’s analysts continued.

Their expectations of a higher peak multiple in the AI replacement cycle compared to 5G are mainly driven by a higher mix of earnings from Services in FY25 versus FY21; the potential for higher peak iPhone volume due to a larger installed base despite lower replacement rates; and a longer cycle driven by advancements in Edge AI capabilities that could increase replacement rates beyond the initial adoption period.

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