Can The Latest Iphone 16e Push The Apple Stock Higher In 2025?

Apple AAPL expanded the iPhone 16 family with the launch of a cheaper iPhone 16e version powered by the latest A18 chip and supporting Apple Intelligence. iPhone 16e features the new Apple C1, the first cellular modem designed by Apple, and a 48MP Fusion camera with an integrated 2x Telephoto option.

iPhone 16e is available in a 6.1-inch display size and has the best battery life ever on this display size offered by Apple. The iPhone 16e, available from Feb. 28, will cost $599 compared with $799 for iPhone 16 and $999 for iPhone 16 Pro.

Can the Affordable iPhone 16e Aid Apple’s Market Share?

The affordable iPhone 16e is expected to boost Apple’s footprint in price-sensitive countries like China and India. Apple has been suffering from sluggish demand for the iPhone in China amid increasing competition from the likes of Huawei and Xiaomi, as well as the lack of Apple Intelligence. Although the iPhone 16e is still way pricier than devices like the Google Pixel 8A and OnePlus 12R, which cost below $500, the availability of Apple Intelligence can be a game changer. 

Although iPhone sales decreased 0.8% year over year to $69.14 billion in the first quarter of fiscal 2025, Apple saw better iPhone 16 sales in those regions where Apple Intelligence was available. iPhone’s active installed base grew to an all-time high and saw a record level of upgrades in the reported quarter. Per Kantar, the iPhone was a top-selling model in the United States, Urban China, India, the U.K., France, Australia and Japan.

Apple launched the first set of Apple Intelligence features in U.S. English for iPhone, iPad and Mac, and introduced more features and expanded to more countries in December. Apple Intelligence is now available in Australia, Canada, New Zealand, South Africa and the U.K.

Apple’s Increasing Emerging Market Share is Positive

Although Greater China sales decreased 11.1% year over year, Apple benefited from strong sales in a number of emerging markets, including India. In the first quarter of fiscal 2025, the iPhone was the top-selling model in the country. The company saw double-digit growth in the installed base in the emerging markets. 

Per Canalys’ latest data, Apple benefited from strong sales in emerging markets in the Asia-Pacific region in 2024. AAPL maintained its lead over Samsung for the second consecutive year, with a market share of 23% compared with the latter’s 16%. Xiaomi trailed both Apple and Samsung with 13% market share. According to Canalys, global smartphone shipments increased 7% year over year to $1.22 billion units in 2024.

Can Service Momentum Aid Apple’s Prospects?

Apple shares have declined 2.3% year to date, underperforming the broader Zacks Computer & Technology sector’s appreciation of 2.1%.

Apple Stock’s Performance

Image Source: Zacks Investment Research

We believe the expanding launch of Apple Intelligence will drive further adoption of iPhone devices. In April, Apple is set to launch the next level of language updates with Apple Intelligence, including French, German, Italian, Portuguese, Spanish, Japanese, Korean, simplified Chinese, and localized English to Singapore and India. 

AAPL’s Services business is expected to drive top-line growth. It now has more than 1 billion paid subscribers across its Services portfolio, more than double what it had four years ago. The expanding content portfolio of Apple TV+, Apple Music and Apple Arcade, as well as the growing user base of Apple Pay, has helped drive subscriber growth.

The Services business benefits from the growing demand for Apple TV+ content and the adoption of Apple Pay. It has expanded Tap to Pay on iPhone to more markets, including the U.A.E., Chile, Japan, Canada, Italy and Germany. Apple Pay is now available in countries like Egypt and Uruguay. The expanding content portfolio of Apple TV+ is noteworthy. 

Apple expects the March-end quarter’s (second-quarter fiscal 2025) revenues to grow low double digits on a year-over-year basis.

AAPL Estimates Show Downward Trend

The Zacks Consensus Estimate for Apple’s second-quarter fiscal 2025 earnings has declined 4.2% to $1.61 per share over the past 30 days, indicating 5.23% growth from the figure reported in the year-ago quarter.

Apple’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, with the average earnings surprise being 4.39%.
 

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Apple Shares Overvalued

The AAPL stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment.

Apple is trading at a premium with a forward 12-month P/E of 30.45X compared with the sector’s 26.88X and higher than the median of 29.85X, reflecting a stretched valuation.

Price/Earnings (F12M)

Image Source: Zacks Investment Research

AAPL Shares: Buy, Sell or Hold?

Apple’s AI push with Apple Intelligence is noteworthy. However, it is still playing catch-up with Microsoft MSFT, Alphabet GOOGL and Amazon AMZN.

Although the Services business has emerged as AAPL’s new cash cow, with an expanding content portfolio for Apple TV+, we believe that Apple Intelligence will take some time to go mainstream.

Hence, we believe that Apple’s near-term growth prospects do not justify a premium valuation.

AAPL currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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