Apple: Generative AI Announcements Fit With Our Expectations and We Maintain Our Valuation

We maintain our $170 fair value estimate for shares of wide-moat Apple after we viewed the opening keynote of its worldwide developers' conference positively and in line with our expectations. Apple unveiled long-awaited generative AI features, grouped under the moniker Apple Intelligence. After seeing the features, we continue to have confidence in a strong iPhone upgrade cycle in fiscal 2025, and we make no changes to our forecast or valuation. Customers will need an iPhone 15 Pro model or better to make full use of Apple Intelligence, which should drive new sales and upgrades, in our view. Apple also announced upgrades across its device operating systems, within which we liked the focus on customization and privacy. Apple shares had a tepid reaction to the keynote, which suggests to us that generative AI and upgrade cycle expectations were baked in to share prices. We see shares as moderately overvalued at current levels.