Apple shares have dropped about 3% since last week’s Worldwide Developers Conference, and many on Wall Street were not impressed. However, Citi disagrees. Its analysts, referencing research from Counterpoint’s Gerrit Schneemann, say WWDC was an important first step in Apple’s AI plans, not a letdown. Here’s what Citi thinks others are overlooking.
The analysts pointed out two key updates from WWDC that they think the market has missed. First, Apple made its partnership with Alphabet’s Gemini official, speeding up its AI progress by using an outside model instead of waiting for its own. Second, Apple improved its hybrid AI system, which handles simple tasks on the device and sends more complex ones to its private cloud.
How Apple will make money from AI has been a big question for investors. Citi thinks Apple might add AI features to its current services instead of charging directly for them. For example, developers could offer AI-powered apps in the App Store at higher prices, and Apple would get its usual cut. Citi also mentioned that Apple could introduce different subscription levels for upgraded Siri and Apple Intelligence features, similar to how Google offers premium options with Google One.
Citi also pointed out that Apple is still doing better than most of the smartphone market, with the iPhone 17 series staying strong worldwide even as the market shrinks. The firm expects Apple to launch a foldable iPhone this fall, but warns that supply and hardware issues might mean a limited release, much like the first Vision Pro.
On Tuesday, Apple shares slipped 0.2% to $295.99 in premarket trading. The stock is up 9% so far this year. Citi rates Apple as a Buy with a $315 price target. Across 50 firms tracked by FactSet, the average target is $318.45, and the consensus rating is Overweight.
