Apple Stock: New Street Research Projects 10% Shortfall in iPhone 16 Shipments

In a recent note, analysts from New Street Research forecasted a 10% shortfall in iPhone 16 shipments for fiscal year 2025, predicting a total of 215 million units, which is lower than market consensus estimates.

Initial consumer reactions to the iPhone 16 have been tepid, with analysts citing “disappointing innovation” and delays related to Apple’s generative AI platform, known as Apple Intelligence, as contributing factors.

Despite these apprehensions, New Street anticipates only a temporary decline in Apple’s stock, observing that the company has become less reliant on iPhone sales performance in recent years. They have assigned a Neutral rating to Apple, setting a target price of $225, based on a 30 times earnings projection for fiscal year 2026. This target reflects a 40% premium over the S&P 500 and aligns with Apple’s average valuation over the past five years.

The report emphasizes that while generative AI is expected to eventually transform handheld devices, it won’t serve as a major catalyst for the current product cycle. New Street believes Apple Intelligence could enhance user interactions through advances in natural language processing and context awareness. However, they caution that these features may not lead to significant improvements in user experiences during this phase.

The integration of AI is expected to evolve gradually within Apple’s ecosystem through future software updates. A significant aspect of this rollout is its compatibility with devices utilizing Apple’s A17 Pro and M1 chips, which together encompass 200-250 million devices, about 10% of Apple’s total active installed base.

While this represents potential for the long term, New Street does not foresee any immediate boost in hardware sales. They recommend that investors manage their expectations regarding the iPhone 16 while also monitoring Apple’s long-term prospects in AI development.