With Apple stock down 10% year to date vs. an 8.5% increase for the S&P 500 index, investors are wondering what it will take to break the consumer electronics giant out of its funk.
"Apple stock has had a rough start to the year," Evercore ISI analyst Amit Daryanani said in a client note late Monday. "We have fielded a large number of investor questions around what could unlock the upside on the stock and help drive the momentum back up."
Daryanani pointed to three possible upside drivers for Apple stock. They include Apple revealing its artificial intelligence strategy, announcing higher dividends and share buybacks, and showing signs of services growth.
Meanwhile, investor worries about Apple include its lack of an AI story, iPhone sales weakness in China, and regulatory issues around its App Store policies, he said.
Apple Stock Sell-Off Called 'Overdone'
"We think the sell-off is rather overdone," Daryanani said. He rates Apple stock as outperform with a price target of 220.
On the stock market today, Apple stock rose 0.3% to close at 173.23.
Many investors have moved out of Apple stock and into AI stocks such as Nvidia, Daryanani said.
Apple Chief Executive Tim Cook has promised to reveal some AI innovations that the company has been working on later this year. That is likely to happen at the company's Worldwide Developers Conference, or WWDC, in June.
"We think Apple's AI strategy will focus on incorporating on-device inference for LLMs (large language models) that will substantially uplift the user experience for not only the iPhone but also Mac and iPad," he said. That could drive a hardware refresh cycle, he said.
Plus, Apple usually updates its capital allocation plans with its March-quarter results in April. That's when it is likely to increase its quarterly dividend and raise its stock repurchase plans, Daryanani said.
Apple stock has a mediocre IBD Composite Rating of 59 out of 99, according to IBD Stock Checkup.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
