Why JP Morgan thinks Apple can regain momentum in coming months

JP Morgan projects Apple may regain market momentum, citing historical outperformance from June to September in six of the last seven years driven by new iPhone releases, with an average stock surge of 18% compared to the S&P 500's 6%. The firm anticipates that low investor expectations for Apple's Worldwide Developers Conference (WWDC) and the iPhone 17 cycle could lead to positive surprises and stock appreciation, particularly if Apple delivers on AI capabilities; however, ongoing US-China trade tensions remain a potential overhang.

Analysis

JP Morgan projects a potential resurgence for Apple's (AAPL) stock in the upcoming months, citing a historical pattern where Apple has outperformed the S&P 500 in six of the last seven years between June and mid-September, with an average stock surge of 18% compared to the S&P 500's less than 6% rise, typically driven by investor anticipation for new iPhone releases. The analyst, Samik Chatterjee, suggests that current low investor expectations for Apple's Worldwide Developers Conference (WWDC) and the iPhone 17 cycle could create an opportunity for upside if the company delivers positive developments, particularly in artificial intelligence capabilities. This outlook follows a challenging period for Apple, with its stock falling 17% year-to-date, underperforming the S&P 500's 1.5% gain, attributed largely to US tariff policies under President Donald Trump impacting its international manufacturing base and the US-China trade standoff. Apple has increased iPhone exports from India by 76% in April while Chinese exports saw a corresponding 76% fall, yet faces the threat of a 25% tariff on foreign-made iPhones. Furthermore, Apple is perceived as lagging in AI, evidenced by a class-action lawsuit for alleged false advertising of AI features in the iPhone 16. JP Morgan believes that improved volume expectations for the iPhone 17 or a favorable shift in tariff perceptions could catalyze stock appreciation, although the absence of a US-China trade deal remains a significant overhang. This perspective is set against a backdrop of mixed analyst sentiment, with Needham recently downgrading Apple to hold due to AI weaknesses, while TipRanks data shows 16 buy ratings, 9 holds, and 4 sells from 29 analysts in the last three months.

Key Decisions for Investors

• Investors should consider the potential for seasonal outperformance in Apple shares from June to September, as highlighted by JP Morgan's historical analysis, driven by new product cycle anticipation.
• Key developments to monitor include Apple's announcements at the Worldwide Developers Conference, especially regarding AI advancements, progress on the iPhone 17 cycle, and any shifts in US-China trade policy or tariff implementations, as these could significantly impact the stock's trajectory.
• Given Apple's recent underperformance, ongoing tariff risks, AI execution challenges, and mixed analyst sentiment, a balanced approach is warranted, weighing potential catalysts against considerable headwinds.