Apple preview - Investor focus on IP Supercycle: Citi
Citi analysts are highlighting a potential "iPhone Super Cycle" driven by Apple (NASDAQ:AAPL) Intelligence as investor excitement builds around Apple's upcoming innovations.
Despite the anticipation, Citi maintains a cautious stance, awaiting the rollout of AI software features and consumer response before adjusting their iPhone unit forecasts for CY24/25.
The sentiment around Apple Intelligence has been notably positive since its introduction at the June WWDC, marketed as "AI for the rest of the people."
This optimism is reflected in the supply chain, with expectations of 90-100 million iPhone 16 A18 processor chip orders this year and buyside projections of 250-260 million iPhone units next year.
However, Citi notes that the full impact of these AI features will likely be realized with the iPhone 17, expected in September 2025, as it will take time for consumers and developers to appreciate and utilize the new AI capabilities.
Adding to the excitement, the bank notes there are rumors of a foldable iPhone potentially arriving in 2026. While foldable phones currently hold less than 2% of the smartphone market, they have been growing at a rapid 200% CAGR from 2019 to 2023.
Citi suggests that a foldable iPhone could help Apple maintain its market share in the premium segment and boost the replacement cycle in developed markets.
Citi also highlights strong growth in Apple's services sector, with App Store revenue up 13% year-over-year in the June quarter, aligning with Apple's expectations for double-digit growth in services revenue.
Despite these positives, Citi acknowledges downside risks, including ongoing antitrust litigations concerning the App Store and iPhones. These legal challenges could impact Apple's operations and market performance.
In conclusion, while the current excitement is palpable, Citi advises a watchful approach as they await tangible consumer responses and further developments in Apple's AI and hardware innovations.
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