To The Moon

$Apple(AAPL)$ has been a goldmine for long-term shareholders, with its stock price skyrocketing over 800% in the past decade, compared to just 180% for the $S&P 500(.SPX)$ . However, over the past year, Apple shareholders have faced a crisis of confidence. While many tech stocks have surged on the AI boom, Apple has struggled to keep up, even lagging behind the index.

But Apple is working hard to turn things around. The company has announced that it will unveil new products at its fall event on September 9, which could be a catalyst for a stock price boost. Should investors consider buying in before then?

The Perfect Storm

Before diving into that, let's examine why investor confidence in Apple has waned.

One obvious issue is Apple's underwhelming financial performance in recent years. For the nine months ending June 29, Apple saw less than 1% revenue growth year-over-year, and iPhone sales even dropped by 1%. Revenue for the 2023 fiscal year fell by 3%, mainly due to lower consumer spending and reduced incentives for upgrading iPhones amid high inflation.

Another factor weighing on Apple's stock is the significant reduction of shares by long-time holder Warren Buffett. Buffett has sold Apple stock for three consecutive quarters, reducing his stake by about 56%. While he cited tax reasons for the sales, it hasn't stopped less committed investors from bailing out.

These factors have weighed down Apple's stock, but things might be about to change.

It's Glowtime

This week, Apple has scheduled its fall product event on September 9, and the invitation proudly reads "It's Glowtime." Most industry experts expect Apple to showcase its next flagship device, the iPhone 16, at this event. There's also a lot of buzz about upgrades to Siri and potential details on Apple Intelligence, Apple's generative AI strategy.

In short, this event could be a major catalyst for a rise in Apple's stock price.

Daniel Loeb, CEO of hedge fund Third Point, recently made a big bet on Apple. In Q2, he added nearly 2 million shares, worth about $443 million, representing nearly 5% of his portfolio. Loeb isn't worried about Apple falling behind in AI and believes Apple Intelligence will significantly boost user demand, pushing Apple's revenue and profits to new heights in the coming years.

Dan Ives, a senior technology analyst at Wedbush, is also optimistic. He points out that around 300 million iPhones globally haven’t been upgraded in over four years.

With AI and pent-up demand driving a new upgrade cycle, Ives predicts Apple could sell over 240 million iPhones in fiscal 2025. At an average price of over $900, this could lead to over $220 billion in iPhone sales, a 10% increase. Ives has a "buy" rating with a $285 target price, implying a 25% upside.

Buying before September 9?

Apple is the world's top smartphone brand, with Counterpoint Research reporting the company holds the top seven spots for best-selling phones of 2023. There are over 2 billion active Apple devices globally, with about 1.4 billion being iPhones.

The sales potential for iPhones and related products is clear. With improving economic conditions and new AI features, consumers are likely to upgrade to the latest iPhone.

On the valuation front, Apple's stock is trading at a P/E ratio of 34, which is a bit high, but considering its long-term growth potential, this premium seems justified.