Investing.com– Wedbush said on Wednesday that recent weakness in Apple Inc (NASDAQ:AAPL) shares- amid a flurry of ratings downgrades and worsening sales in China- was overdone, especially before the company’s December quarter earnings.
Apple shares were trading down 12% over the past month, as recent data showed the company lost even more market share in the Chinese mobile phone market. This prompted two ratings downgrades on the stock this week.
But Wedbush analysts said that while Chinese demand was easing, they saw overall unit declines in the region as “manageable,” and that strength in other markets will allow Apple to at least meet street estimates for the December quarter.
Wedbush also expects Apple’s services revenue to remain strong, offsetting headwinds from dwindling device sales. The company will report its December quarter earnings next week.
The brokerage maintained Apple at Outperform with a price target of $325- representing an upside of 45.2% from the stock’s Wednesday close.
Wedbush touted potential in Apple Intelligence- the company’s artificial intelligence offering, stating that its continued rollout will drive services growth in the coming years.
“What the bears continue to miss on Apple is its golden installed base of 1.5 billion iPhones and 2.3 billion iOS devices is unmatched and will create a new AI driven growth story that the Street is not factoring into the stock,” Wedbush analysts wrote in a note.
Still, they also noted that Apple’s stock was expensive relative to historical standards, but that a recent sell-off in the stock provided a “golden opportunity” to buy, on hopes that its AI ambitions will pay of.
Apple’s finding of an AI partner in China is also expected to further this trend, Wedbush said. Recent reports said the company was in talks with Chinese internet giants including Tencent, Baidu (NASDAQ:BIDU), and ByteDance over using their AI models on their devices.
Apple is yet to roll out its AI features in Chinese devices, due to regulatory hurdles. The company has also largely lagged its global rivals, especially Samsung (KS:005930), in incorporating AI features into its flagship devices, specifically the iPhone.
In China, Apple is grappling with heightened competition from local mobile phone makers such as Xiaomi (OTC:XIACF) and Huawei, who unveiled a slew of competitive offerings over the past year.
