Analyst Samik Chatterjee from JPMorgan has recently discussed the potential trajectory of Apple Inc. in 2025, presenting a dual-case outlook that intricately weaves together artificial intelligence advancements and traditional business fundamentals. This analysis comes at a time when the technology sector is eagerly watching Apple's next moves, particularly in relation to its upcoming iPhone 17, expected to be unveiled in late 2025.
In his report, Chatterjee outlined a bullish scenario where AI enhancements significantly bolster the iPhone 17's appeal and, consequently, drive substantial growth in Services revenue. He noted that the forecast anticipates an increase in iPhone shipments from 230 million units in the fiscal year 2025 to 263 million by FY27. The uptick is attributed to consumer interest in new AI-enabled features that enhance the user experience. “Margins remain underappreciated,” Chatterjee explained, referring to how commodity price tailwinds combined with Apple’s vertical integration strategies could mitigate costs.
He further underlined the importance of Services revenue, which is on track to grow in the mid-teens percentage range. This sector is projected to represent 44% of Apple’s total gross profits by fiscal year 2027, thus serving as a robust profitability lever. Chatterjee forecasts a compound annual growth rate (CAGR) of 9% for revenue and a 16% CAGR for earnings, reflecting the potential that AI has in bolstering Apple’s market valuation. “Our bull case forecasts with AI, supporting premium valuation,” he stated.
However, Chatterjee also presented a more cautious perspective, emphasising that even in the absence of AI-driven momentum, Apple's foundational business model remains strong. He indicated that the current iPhone replacement rate, relative to the installed base, is at an all-time low, which reduces potential risk. Without AI, he predicts mid-single-digit revenue growth, which could still facilitate earnings growth between 8% to 10%, aided by improved margins and share repurchase strategies.
China is identified as a significant variable in this equation. Chatterjee suggested that a rise in consumer spending within the Chinese market could enhance sales volumes, independent of AI developments. Additionally, Apple’s strategic efforts to diversify its manufacturing beyond China, particularly into India, are seen as measures to mitigate challenges associated with tariffs.
Ultimately, while Apple’s stock may experience limited volatility in 2025, Chatterjee concluded that the company’s valuation is expected to remain stable. He elucidated, "the valuation multiple is likely to remain intact until further demand data points emerge on the iPhone 17 cycle."
In summary, whether propelled by AI innovations or grounded in its strong traditional business model, Apple is expected to maintain its premium market position, thereby sustaining investor confidence as it approaches a pivotal year.
Source: Noah Wire Services