Apple Stock Will Get Q3 Boost From iPhones, Analyst Says This Is The 'Elephant In The Room'

An Apple Inc AAPL analyst says iPhone demand will be the key item to watch when the technology giant reports third-quarter financial results Thursday after market close.

The Apple Analyst: Wedbush analyst Dan Ives maintains an Outperform rating on Apple with a price target of $270.

The Analyst Takeaways: Ives expects a mini rebound for China iPhone sales in Q3.

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"Our Asia checks have showed stable iPhone demand globally this quarter…with some improvement in the China market which is a key theme for Apple," Ives said.

China is a "persistent growth headwind" for Apple, Ives said in a new investor note, due to increased competition. "This quarter is just the appetizer for the main event, which is the launch of iPhone 17 in September."

Ives anticipates that the iPhone 17 will exhibit accelerated unit growth for Apple, driven by pent-up demand from consumers. He also estimates that 20% of the 1.5 billion iPhones worldwide have not had an upgrade in over four years.

The analyst said Apple's Services segment is another area to watch and should provide upside in the quarter.

Outside of the iPhone and Services, Ives calls AI the "elephant in the room" for Apple.

The rest of the tech world is focused on monetizing AI right now, Ives says. However, Apple's AI growth strategy has been "invisible."

"Apple's WWDC event in June felt like an episode out of Back to the Future with barely no mention of AI while every other tech company and developer in the world is focused on AI."

An AI monetization strategy for Apple could be worth up to $75 per share, he adds. But "time is ticking" to figure out a plan.

Ives said one option is for Apple to acquire Perplexity, which he said would be a "no brainer deal."

"The reality now is that AI technology on the enterprise and consumer landscape are happening at such a rapid pace Apple will not be able to catchup with an internally built solution to turn Siri into the next AI gateway for consumers."

Ives said Apple CEO Tim Cook could be the CEO for another five years, but without an acquisition or AI strategy, his legacy could be defined by current negative items like missing AI strategy, tension with President Donald Trump on supply chain and navigating tariffs on the iPhone.

"It's time for Cook and Cupertino to face the new reality of this quickly morphing AI driven tech landscape…because if they do not change it will be a historic strategic black eye for Apple in our view."

AAPL Price Action: Apple stock trades at $211.17 on Wednesday versus a 52-week trading range of $169.21 to $260.10. Apple stock is down 13.4% year-to-date.

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