Can iPhone 16 help Apple stock skyrocket?

Apple (AAPL -0.44%) unveiled its much-anticipated next-generation iPhone earlier this week at its iPhone 16 launch event. While Apple enthusiasts will no doubt be clamoring for the latest version of the smartphone, the key question on investors’ minds is whether the upgrades will be enough to trigger a hardware upgrade cycle that can fuel stock.

While the new iPhone comes with some great new features, let’s see why a significant upgrade cycle may not be in the cards.

Apple Intelligence and hardware upgrades

The key feature that Apple hopes will drive consumers to its next-generation iPhone is the integration of Apple Intelligence. Apple Intelligence is the suite of artificial intelligence (AI) tools that help improve the user experience.

Apple Intelligence will help users in several key ways: expression, prioritization, reminders and an improved Siri. On the expression side, it will help users perform tasks such as rewriting, proofreading, and summarizing text in their own and third-party apps. It can also provide summary notifications across all apps and only show priority emails and text messages to users of its new Disruption Reduction feature.

For memories, users will be able to search for photos using natural language; they will also be able to create videos just by typing a description. Within photos, users will also be able to remove distracting background objects using the new cleanup tool. Meanwhile, Siri will now have better language understanding skills and will be able to answer questions about a device’s settings and functions.

Also on the artificial intelligence front, Apple has announced that it will add a new visual intelligence feature later this year. This new feature will allow users to use the camera on their iPhones to learn about objects around them. It is similar to the feature Alphabet previously introduced with Google Lens.

In addition to its new AI features, Apple has introduced several other improvements to the iPhone. This includes a faster processor with its new A18 chip and a larger battery, both of which will help with battery life. The company has also introduced a new camera control feature that will allow users to launch the camera more quickly and control it from a side button. Its new camera system will have a telephoto lens and an ultra-wide lens that will also allow for macro photography.

Image source: Getty Images.

Can iPhone 16 help Apple stock skyrocket?

With no price increases over previous-generation iPhones, Apple will have to rely on increased iPhone demand to fuel its revenue. The company is hoping that its new AI-powered iPhone will attract a lot of interest and trigger a hardware upgrade cycle.

However, there are signs that the average consumer just isn’t that interested in using AI functions in their daily lives. A recent CNET survey found that users are more concerned with battery life (61%), camera features (38%) and storage (46%) as reasons to upgrade their smartphones than features AI (18%). The survey also found that more than a quarter of users did not think AI features would be useful, and half were unwilling to pay extra for AI features.

For those looking for AI to power an iPhone hardware refresh cycle, this isn’t the best news. However, it shows that Apple was smart to add improved battery life and camera features, not just focusing on AI.

The company doesn’t exactly face the harshest of comparisons. iPhone revenue has declined in the past two quarters. It rose just 3% during the quarter ended in September and 6% in the previous quarter ended in December. I think the new features combined with relatively lightweight compounds should help boost sales, but maybe not very significantly.

With Apple trading at a forward price-to-earnings (P/E) ratio of nearly 30 based on analysts’ estimates for the next fiscal year, the stock appears to have stronger revenue growth than the company is currently generating, which is less. of 1% in the first nine months of the current fiscal year.

AAPL PE ratio data (forward 1y) by YCharts

I don’t think the release of the iPhone 16 is enough to help Apple stock skyrocket. I’d continue to hold the stock at current levels, but I wouldn’t be a new-money Apple buyer.