Apple Nears $3 Trillion Valuation Ahead of WWDC: Will Stocks Keep Climbing?

Apple will hold its annual Worldwide Developer's Conference keynote on June 10, beginning a five-day event. Investors are likely to focus on updates regarding the company's artificial intelligence (AI) strategy. Expectations include the unveiling of iOS 18 and potential new AI features.

Analysts believe new iPhones with AI capabilities could accelerate the iPhone upgrade cycle. Additionally, the company may address reports of talks with Google and OpenAI about integrating AI technology into Apple devices. While WWDC could impact Apple's stock, it may not be as significant a catalyst as the anticipated iPhone 16 announcement in the fall.

According to Barchart analyst Mark R. Hake, Apple's FCF margin is around 27.7%, and with projected sales of $410.7 billion for the year ending September 2024, the FCF could rise to $113.8 billion. Using a 2.8% FCF yield metric, the market cap could reach $4.06 trillion, translating to a stock price of $265.32. This valuation is supported by buybacks and a 0.5% dividend yield, giving a total shareholder yield of 2.8% to 3.0%. Analysts also have an average price target of $206.35, a 6% potential upside. Overall, AAPL stock appears undervalued with an average potential upside of nearly 25%, though it may take up to a year for this increase to materialize.

• Bank of America analysts indicated they anticipate "upcoming AI enabled phones (IntelliPhones) to drive a multi-year upgrade cycle similar to the step function improvement driven by the introduction of smartphones."

• The analysts said they "expect the adoption curve of AI phones to be faster than the adoption of smartphones, 5G," and that "with an installed base of over 4bn smartphones," Apple could have an opportunity for the next upgrade cycle to be a "once in a decade type of event."

• Apple has been fairly quiet in discussing its AI offerings to the public, though its chief executive Tim Cook said in February that the company has put a "tremendous amount of time and effort" into generative AI.