J.P. Morgan Reiterates Overweight Rating for AAPL Despite Lowering iPhone 16 Unit Forecast for 2024
J.P. Morgan has reaffirmed its overweight rating for Apple (AAPL), but has slightly lowered its forecast for iPhone 16 units in 2024. The change comes as early demand for the new iPhone 16, particularly the high-end models, has been more muted than expected.
Early Signs Show a Robust Product Cycle
Analyst Samik Chatterjee from J.P. Morgan notes that while there are signs of a strong product cycle for the iPhone 16, the initial momentum hasn’t quite matched that of previous launches—especially for the Pro models. One key reason? The highly anticipated Apple Intelligence AI features were not available at launch, which may have caused some customers to hold off on purchasing.
Delayed Demand, But Not a Drop
Chatterjee believes that the early dip in demand is likely temporary. Many consumers might be waiting for Apple Intelligence to roll out before committing to a purchase, especially since these AI features promise to enhance the iPhone’s value proposition. This has led J.P. Morgan to lower its near-term iPhone unit forecast for the second half of 2024 from 130 million to 126 million. By comparison, Apple shipped 132 million iPhones in the same period last year.
Despite this revision, Chatterjee remains optimistic that sales will ramp up over time and ultimately surpass both the iPhone 15 and iPhone 14.
AI Features Expected to Drive Future Sales
J.P. Morgan is confident that the AI-based iPhones will gain traction once the Apple Intelligence features are widely available. Initially, these features will be limited to English (expected in the second half of 2024), with support for other languages coming in 2025. As these AI capabilities become more widespread, consumer interest is expected to grow, leading to strong sales for the iPhone 16 Series over the next year.
The analyst predicts that the iPhone 16 Series will track ahead of the iPhone 15 and iPhone 14 models, and come in just slightly below the iPhone 13 and iPhone 12 in terms of volume. Looking ahead, the 2025 iPhone Series is expected to mark the peak of the AI cycle, with even more advanced AI and hardware features to entice buyers.
Revenue and Earnings Outlook
As a result of the softer-than-expected iPhone 16 launch, J.P. Morgan has slightly lowered its near-term revenue and earnings forecast for Apple. However, the firm’s out-year forecast remains unchanged. J.P. Morgan continues to see strong long-term potential for Apple, reiterating its overweight rating and maintaining a December 2025 price target of $265.
While the early iPhone 16 sales may not have taken off as quickly as expected, Apple’s future—especially with the rollout of AI features—still looks very bright!
