Apple stock is coming hot into next week’s WWDC. How the company can meet the moment
Earnings season may be coming to an end — but on Monday, for one of our “own it, don’t trade it” names, comes a much higher-stakes event as shares hover around all-time highs. That is when Apple kicks off its annual Worldwide Developers Conference, or WWDC for short. When it comes to Apple and what investors in the stock at these levels care about, it is all about Apple Intelligence, the company’s AI suite. Following numerous delays, hiccups, and strategic reboots, Apple is finally set to unveil a new, more personalized Siri. Powered by Google’s Gemini AI model, the digital assistant is expected to be capable of conversation-like interactions and the ability to engage with apps and services. Shares of Apple are up over 20% since the end of March. Since soaring more than 3% after near-perfect earnings on April 30, the stock had tacked on another 12.5% as of Tuesday’s record-high close of $315. We’re only just shy of that on Friday. That’s what high expectations look like, and as we learned this week after earnings from CrowdStrike and Broadcom (both delivered beat-and-raise quarters), high expectations that go unmet are greeted with selling. In the case of Apple, we do think outgoing CEO Tim Cook and the gang will deliver this time around. This year’s WWDC is expected to be Cook’s last final major event at the helm. John Ternus, senior vice president of hardware engineering, is set to take over Sept. 1, which, timing-wise, would be before Apple’s typical new iPhone launch. We suspect Cook has no plans to go out on anything other than a high note. He did confirm on the company’s most recent earnings call that a more personalized Siri is, indeed, coming this year. In addition to a Gemini-powered version of Siri (recall, Apple deepened its relationship with Alphabet’s Google to bolster its AI features), we will be interested to see how Apple offers up the ability for users to work with other large language models (LLMs), and how it has worked to enhance not only its own apps, but those of third-party developers. We probably won’t get too many details about how Apple can monetize these new features (aside from perhaps a new subscription), but we expect the Street to provide plenty of views on monetization paths. On Friday, analysts at Bernstein opined that Apple could charge a fee for any third-party services that Apple Intelligence facilitates. They speculated that apps like Uber could be hooked into Apple’s calendar. It is certainly an interesting thought, and begs the question: will Apple be looking to have app developers with competing services bidding for priority in Apple Intelligence, not unlike advertisers bidding for placement on a Google Search? A subscription to a more powerful version of Siri would be low-hanging fruit as a new revenue stream, but it would also enhance the Apple One bundle of first-party services. And, we know that anything that can boost services revenue is a boon to profitability because the margins on services are way higher than hardware. Security is always a big one, especially for Apple. For that reason, expect a good deal of attention to be on how Apple plans to address the security of the LLMs it provides access to. We’ll be looking for a two-pronged approach. First, how is Apple handling those AI queries that have heavy compute requirements and must therefore be sent off to the cloud for processing? Second, what has Apple been able to do with on-device capabilities, which are inherently more secure and provide lower latency? Bottom line A lot is riding on this year’s WWDC for Apple, with its stock trading near an all-time high. Expectations are high. Fortunately, we think Apple will rise to the occasion and give us yet another reason to own the name long-term. Should this new Siri not only wow investors but also consumers, Apple will benefit by monetizing it on its devices and services. Richer AI features could also catalyze a quicker pace of upgrades, or a change in the sales mix toward higher-end devices with more computing power, which is becoming increasingly valuable in the era of artificial intelligence. (Jim Cramer’s Charitable Trust is long AAPL, GOOGL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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