With Apple’s Earnings in the Rear View, Attention Turns to Upcoming Growth Catalysts

After Apple (AAPL) reported better-than-expected results for the fiscal second quarter and announced a $110 billion stock buyback program, analysts highlighted potential near-term growth catalysts for the iPhone maker.

They pointed to upcoming events including an expected new iPad launch event on Tuesday and Apple’s annual developers’ conference in June, as well as opportunities around artificial intelligence (AI). Analysts also suggested Apple’s China headwinds could be less significant than previously anticipated.

Apple shares were up 7.4% at $185.75 around 2:15 p.m. ET Friday as the stock closed in on erasing its year-to-date losses in what Citi analysts called a “relief rally.”

China Headwinds Could Be Less Severe Than Previously Thought

The company reported an 8% year-over-year decline in sales in the Greater China region, though Apple CEO Tim Cook noted iPhone sales in Mainland China grew sequentially.

Concerns around the slowdown in one of Apple’s largest markets drove shares lower last quarter, but the company reassured investors that iPhone revenue is resilient despite macro conditions.

CFRA analysts said they believe the results “appear to change the narrative on the AAPL story, as China is holding up better than expected and there are a host of upcoming events/catalysts on the horizon that could improve investor sentiment and drive consensus estimates higher.”

Upcoming iPad Event, Likely AI-Focused Developers Conference

Apple is holding an event on Tuesday where the company is expected to unveil new iPad models and is set to host its annual Worldwide Developers Conference (WWDC) in June.

Apple’s better-than-expected results are “combining with the expectations of an upgrade cycle-led tailwind in iPads (helped by the launch event next week),” JPMorgan analysts said. They added that “management’s commentary relative to the importance of Generative AI suggests that the 2024 WWDC event will be primarily focused on AI features that Apple is looking to include in iOS 18.”

Citi analysts said they “expect Apple to unveil multiple AI developer tools to enhance interactivity and productivity across its devices and operating system with features like customized Siri find & search with context.”

Wedbush said the post-earnings rally “is the drumroll moment as Apple is set to unveil its long awaited AI strategy to its golden installed base and developer community at WWDC in June.”

AI as Next Major Growth Catalyst

While Apple has yet to make any major AI-related announcements, analysts indicate that AI integration could be key to catalyzing a new wave of growth for the iPhone maker.

Apple CEO Tim Cook said the company is “bullish” on AI, adding that generative AI is a “very key opportunity” and Apple is “well positioned” to gain from the emerging tech.

Wedbush analysts said the company announcing its AI strategy, which they believe “will consist of an AI App Store that will the foundational starting point for developers and AI apps over the coming years,” could set off “an AI driven supercycle starting with iPhone 16 this Fall.”

They added that the anticipated AI announcement “along with an iPhone 16 model that will break new ground in AI” could begin the next supercycle at Apple. Bank of America analysts have also indicated that AI capabilities in new devices could accelerate the iPhone upgrade cycle.