Apple must reinvigorate the iPhone's appeal. Tomorrow holds its opportunity.
Last year, the iPhone generated more than half of Apple's overall revenue. However, the rate of growth in sales has slowed down as customers have been reluctant to upgrade to newer models. This issue confronts many device companies but has been particularly troublesome for Apple as it struggles with other challenges, such as intense competition in China and a significant antitrust lawsuit.
With Apple's Worldwide Developer Conference appearing this Monday, it's expected that the tech giant will unveil advanced artificial intelligence features. These updates could reignite excitement for its products and potentially help Apple compete with the rest of the tech industry, which has already been fully immersed in the use of AI. Since the iPhone is Apple's most important product, these new AI features could inspire customers to upgrade when the iPhone 16 is launched later this year.
Although Apple's status as a technology powerhouse isn't in danger, investment analysts emphasize the need for the company to boost iPhone sales to maintain its growth.
"This can't be another 'Oh, we'll do something cool later on' kind of presentation. They know that," said D.A. Davidson analyst Gil Luria in an interview with CNN. "For Apple's stock to work, for the business to grow, we need to hear from them why we should buy iPhone 16."
Investors also want Apple to show that it can hold its own in the AI race as its competitors continue to outline their strategies for the future of technology development.
Emarketer senior analyst Gadjo Sevilla explains, "The timing is critical for Apple. Nvidia just overtook it as the second most valuable technology company behind Microsoft, which is also set to challenge Apple's device business with new AI-powered PCs. Any mishap by Apple at this juncture could result in it losing its status as a tech leader."
The Much-Awaited AI iPhone
Apple has seen success in incorporating AI into their products, even though it's often subtle and unnoticeable to the user. Soon, the company is anticipated to reveal more sophisticated AI updates.
Numerous speculations point towards Apple announcing new generative AI capabilities for iOS. These improvements could significantly benefit Siri, its personal assistant. With an AI-empowered Siri, users might be able to ask for tasks like remembering a photo from years ago or getting detailed weather, news, or trivia updates. As time passes, the AI may understand users' preferences and even personality, enabling personalized responses.
As a result of competitors launching AI-equipped devices, Apple is under significant pressure to demonstrate groundbreaking features that surpass what's already been introduced elsewhere. However, the most significant concern regarding the WWDC is whether the new AI capabilities will be accessible to all iPhone owners or if they'll only be available on newer devices slated for release in fall.
If the features are attractive and inaccessible to users of older iPhones, Apple could experience a major upgrade cycle that would have broader consequences for the company.
According to Luria, if the new AI features are unexciting or backward-compatible, Apple's stock could plummet to around $160 per share. Conversely, if the features entice users to upgrade in the fall, the company's shares could increase up to $240. (Apple's stock closed on Friday at $197.)
"That's the key: if it's compelling and not backward-compatible, then Apple will have the first upgrade cycle in four years," Luria asserts. "And that will mean a lot for the stock because that was the last time they had a substantial increase."
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Apple needs to leverage its AI capabilities to reinvent the iPhone and boost sales, as analysts believe that without compelling AI features in the iPhone 16, the company's stock could stagnate. The tech industry's focus on AI has put pressure on Apple to release advanced AI features at its Worldwide Developer Conference, but investors are concerned about whether these enhancements will be exclusive to newer devices.
