This Could Be Great News for Apple Shareholders

It hasn't been the easiest year for the consumer tech giant Apple (NASDAQ: AAPL). The company was heavily impacted by the Trump administration's tariffs, and CEO Tim Cook had to help the company navigate the political landscape carefully. Furthermore, many analysts and investors have called the company out for its lack of strategic direction when it comes to artificial intelligence, especially when compared to peers in the "Magnificent Seven."

But recently, the stock rallied after investors got great news.

iPhone 17 sales are reportedly outperforming

In mid-September, Apple released the iPhone 17, the latest model of its flagship product. The iPhone 17 boasts a new "Center Stage front camera" that features higher resolution and better selfie picture capabilities. The model also features all-day battery life and the ability to charge up to 50% battery life in 20 minutes. Intelligent monitoring can also anticipate when the battery might run low and conserve power at the right time.

Image source: Apple.

Following the launch, Wall Street analysts seemed split on the new iPhone, with some impressed and others questioning how meaningful the upgrades were. So far, though, iPhone 17 sales seem to be off to a good start. According to the research firm Counterpoint, the iPhone 17 has sold 14% more phones than the iPhone 16 models in the first 10 days of availability in the U.S. and China.

Analysts are now increasingly bullish that Apple will report strong sales numbers when the company reports earnings on Oct. 29. Following the news about sales, Loop Capital analyst Ananda Baruah upgraded Apple stock from a hold to a buy and significantly raised his price target from $226 per share to $315. "While [the] Street is baking in some degree of outperformance from AAPL's iPhone 17 family of products, we believe there remains material upside to Street expectations through CY2027," Baruah wrote in a research note.

iPhone sales can make up over half of Apple's total revenue, so any good news on this front is bound to raise the stock price.

Is the good news enough to boost Apple?

Solid iPhone sales are definitely great news for shareholders, since it's the company's flagship product. I think part of the success can be attributed to the fact that the iPhone 17 was priced at the same level as the iPhone 16 but featured noticeable product improvements, including more storage, a better camera, and faster charging capabilities. These are all core product features, so the company's ability to deliver a competitive price despite all of the tariff drama is worthy of recognition.

Is it enough to really say Apple has turned the corner from its struggles and is an easy buy at these levels? I am not so sure just yet. Remember, the stock has still underperformed the Magnificent Seven this year (as of Oct. 21). The stock also trades above its five-year average valuation at close to 33 times forward earnings.

Investors are still questioning whether Apple has a good strategy to reap the benefits of the AI revolution. While AI bears are questioning the level of AI capital expenditure spending across the broader industry right now, the market has largely rewarded companies that boost AI capex spending, believing it shows that they are racing to win the AI war. Apple's levels of AI capex still lag behind others in the Magnificent Seven. The patience may end up looking like a genius move down the road if the AI trade falters, but investors are still largely pedal to the metal on AI right now.

In fact, many investors are pushing for Apple to make a splash and buy the AI chatbot Perplexity, and Apple's CEO Tim Cook said he is open to AI acquisitions. Long-term investors certainly don't have to sell Apple, but it's not a glaring buy right now, despite the recent good news. Perhaps the upcoming quarterly results will change that.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.