Will Apple’s expectations get even higher? Club stock made history on Tuesday by surpassing the $4 trillion market cap for the first time in history, surpassing the same level as fellow portfolio stocks Nvidia and Microsoft. (On Wednesday, NVIDIA became the first company to be valued at more than $5 trillion.) Apple shares closed Tuesday just below the $4 trillion milestone and have ebbed and flowed in subsequent trading. Apple’s stock, left for dead earlier this year, has made a remarkable comeback following CEO Tim Cook’s endorsement of President Donald Trump’s desire to bring manufacturing back to the United States, and more recently after it emerged that demand for new iPhone models was stronger than analysts expected. A favorable ruling in a landmark antitrust case that secured Apple’s lucrative search partnership with Alphabet’s Google makes the tech giant’s earnings report scheduled for Thursday evening one of the most important for Apple in recent memory. That’s because the seemingly long-anticipated iPhone upgrade cycle is finally taking shape, and combined with other tailwinds, Apple has bought time to deliver key generative artificial intelligence capabilities before its lackluster AI rollout regains traction. AAPL YTD Mountain Apple YTD But Bank of America isn’t worried about AI. In fact, analysts said in a note Wednesday that Apple will be the “ultimate winner” in the artificial intelligence space. That’s why BofA believes Apple’s profits could double between 2024 and 2030. Analysts also raised their price target for Apple from $270 to $320 per share, suggesting an 18% upside from Tuesday’s closing price. JPMorgan said earlier this week that Apple’s stock is “heading into the upcoming earnings session with greater brightness than at any time in the past year.” Analysts cited “strong revenue and earnings” that “reinforces the company’s positive product cycle for investors.” Analysts raised their price target to $290 from $280. Despite the positives, Apple naysayers continue to question the stock due to management’s overwhelming adoption of artificial intelligence. Apple Intelligence, the iPhone maker’s generative AI suite, has faced a series of delays. To make matters worse, the company has yet to share much about its roadmap, even though it has delayed the launch of its AI-enhanced version of Siri until at least 2026. Additionally, Apple’s AI talent continues to be poached by big tech companies like Club, which owns the meta platform. Still, Apple has plenty of power to dispel these AI concerns ahead of its earnings report. In fact, the club believes there are three reasons why investors were able to overlook the overhang. Demand for iPhone 17 First of all, the latest lineup of iPhone 17 models has shown promising signs since its launch in September, along with the iPhone Air. Initial lead times for the iPhone 17, a measure of consumer demand, are significantly longer than those for the iPhone 16, which debuted last year. Recent data from research firms also supports this idea. According to Counterpoint Research, Apple’s global smartphone shipments increased 4% year over year in the third quarter. The report, published on October 15, says the latest iPhone 17 series has been “well received” and is experiencing “record pre-orders across the region.” It is also welcome news that mobile phone companies have made positive comments regarding iPhone sales, Apple’s biggest source of revenue. Late last month, T-Mobile’s then-retired CEO Mike Siebert said the company’s iPhone sales had hit an all-time high. “We just had the biggest iPhone week,” Sievert, who has since stepped down as chief executive, told CNBC’s Jim Cramer in an interview. “This is a double-digit increase compared to a year ago,” he said at the time. For the club, Jim described the iPhone 17’s debut as “huge”, adding that the latest device is a “great deal” over past versions. “What Apple is saying is, ‘Look, these are list prices, but we got discounts from carriers like Mike Siebert at T-Mobile, and the trade-in value was more than we thought.’ So there’s no price increase,” Jim said in September. Baird analysts said that if the iPhone receives solid acceptance, fiscal 2025 fourth-quarter results could exceed expectations. “We continue to expect AAPL to report better-than-expected upside for the September quarter, leading to a better-than-expected December quarter later this week,” Baird said in a note Tuesday. “Our research suggests that this may be longer than the average iPhone refresh cycle, as lead times for the base iPhone 17 continue to exceed last year’s levels (more than six weeks after launch).” In response, the analysts raised their price target on Apple to $280 from $230. Tariffs Apple is in a better position this quarter because of how management handled President Trump’s tariff demands. Cook announced $100 billion in additional investments in U.S. manufacturing in August to improve relations with the White House after the White House threatened Apple with 25% tariffs on iPhones made overseas in May. This was a big deal for Apple, given that much of the company’s manufacturing still happens in China, which is also the company’s second-largest market. Apple has been able to mitigate many of these risks through tariffs, which could incur additional costs or force the company to raise device prices. The latter could suppress demand in the future. Google ruled this quarter that Apple was in a better position than feared, after a federal judge ruled in early September that Google could continue to pay Apple billions of dollars a year to be the default search engine on iPhones and other devices. The ruling follows a years-long battle between the Justice Department and Google over alleged violations of U.S. antitrust laws. Jim called the news “shockingly positive” at the time, adding that it was a “huge win for Apple.” The decision means Apple can continue to make billions of dollars in its high-margin services division at little cost. (The services division makes money from subscription and license fees through services such as Apple TV, iCloud, Apple Music, and the App Store.) As part of this deal, Apple is estimated to be paid $20 billion a year by Google. Overall, TDCowen analysts said Monday that Apple stock sentiment is “significantly positive” on quarterly earnings, in part because the search revenue stream from Google remains intact. It also serves as a blueprint for deploying AI chatbots. It’s true that Apple has a high bar to reach this earnings season after announcing impressive Q3 releases in July. The company posted its biggest quarterly sales growth since 2021. Once again, Apple achieved record highs based on active devices across all product categories. The key services business achieved a new record, supported by better-than-expected gross margins. Conclusion High expectations aside, Apple still appears to be in a good position for the release. Apple is expected to increase its earnings per share (EPS) by 8% to $1.77 in the final quarter of fiscal 2025, according to consensus estimates from market data provider LSEG. Sales for the three months ending in September are expected to increase 7.7% year-on-year to $102.24 billion. Ever since the iPhone was launched in September, the club has been furiously debating the latest line of smartphones. This is especially important as Apple faces an increasingly crowded smartphone market in China as well. Investors may be breathing a sigh of relief heading into the quarter, as Apple was able to avoid two major headwinds that weighed on the stock earlier this year: President Trump’s tariff demands and a Justice Department ruling. While Apple’s gradual rollout of artificial intelligence is noteworthy, we’ve said time and time again that we don’t need to be first to market to win. Why should AI be different?More importantly, our leadership team has a track record of delivering the best and most innovative devices. Although Apple didn’t invent the smartphone, the iPhone remains “the greatest product in the world,” Jim said. That’s why we continue to maintain our “proprietary, don’t trade” theory on this quality stock. (Jim Cramer’s charitable trusts are long AAPL, META, MSFT, NVDA. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
