Apple stock: New Street Research sees a 10% miss on iPhone 16 shipments

Investing.com -- In a note Wednesday, New Street Research analysts predicted a 10% shortfall in iPhone 16 shipments for FY25, projecting 215 million units, which is below consensus estimates.

Early signs indicate that consumer reception of the iPhone 16 has been lukewarm, with analysts attributing this to "disappointing innovation" and delays in Apple (NASDAQ:AAPL ) Intelligence, the company's generative AI platform.

Despite these concerns, New Street believes the stock will experience only a temporary dip, noting that Apple has become less sensitive to iPhone performance in recent years.

They maintain a Neutral rating on Apple with a target price of $225, which is based on a 30x FY26 EPS and represents a 40% premium to the S&P 500 , in line with Apple's five-year average valuation.

The report highlights that although generative AI is expected to revolutionize handheld devices over time, it will not be a key driver of this product cycle.

The firm believes Apple's AI, branded as Apple Intelligence, has the potential to transform user interactions through natural language processing and context awareness.

However, according to New Street Research, these features "are unlikely to result in game-changing user experiences" during this cycle.

Instead, they foresee AI becoming more deeply integrated into Apple's ecosystem over time through subsequent software updates.

One of the more notable aspects of the AI rollout is its compatibility with devices powered by Apple's A17 Pro and M1 chips, spanning 200-250 million devices, which account for about 10% of the company's active installed base, said New Street.

While this offers long-term potential, the firm doesn't expect it to drive significant hardware sales in the near term.

New Street suggests investors temper their expectations for iPhone 16, while keeping an eye on Apple's longer-term AI prospects.

Source: Investing.com