Here are the top 9 debates and questions according to Needham By Investing.com

Investing.com — In a note to clients on Thursday, analysts at Needham looked at the most pressing debates and questions investors have about Apple Inc (NASDAQ: ), just ahead of the expected release of the tech giant’s new iPhone 16.

The investment bank addresses nine key areas of concern, each related to Apple’s stock performance and future valuation.

1) ‘iPhone upgrade cycle sync:’ A core concern is when the next significant iPhone replacement cycle will begin.

Needham estimates that iPhone revenue will account for more than 50% of Apple’s $390 billion total in FY24. This makes new iPhone sales crucial to the company’s revenue performance.

“The year consumers replace their iPhones determines whether AAPL’s stock price is too cheap or too expensive today,” Needham analysts point out.

2) ‘GenAI timing:’ Needham says investors are questioning Apple’s slow entry into the generative AI (GenAI) space, especially with the iPhone 16’s limited AI capabilities. Android competitors, backed by Google’s superior AI technology, are a growing threat bigger.

“At a time when GOOGL, AMZN, META (NASDAQ: ) and MSFT are spending $30-70 billion creating and enabling GenAI capabilities (including building LLMs), AAPL is spending too little and being irrevocably left behind?” is one of the questions investors ask, Needham points out.

3) ‘China:’ With iPhone sales in China declining as a percentage of total revenue, geopolitical tensions add pressure. Analysts point out that many investors question whether current valuations sufficiently take into account the risks of higher import costs from China or potential retaliatory actions against US companies.

4) ‘iPhone Addiction:’ Needham notes that more than 50 percent of Apple’s total revenue comes from iPhone sales, making it a pivot for the company. It also points out that Apple reports that it has 2.2 billion active devices in use by approximately 1.25 billion customers, suggesting that on average each customer in the Apple ecosystem owns 1.8 devices.

“We believe the iPhone is the ‘anchor’ device and all other devices are add-ons, similar to the speed of services. Therefore, when a consumer changes their iPhone, they also change their watch and AirPods, but not the other way around,” the analysts wrote.

Meanwhile, the key question among investors is, “Isn’t AAPL essentially a one-product company?” Heavy reliance on the iPhone makes diversification a persistent concern among investors.

5) ‘Vision Pro:’ Apple’s $3,499 Vision Pro headset is met with skepticism. Analysts report mixed views from investors, with many seeing it as a distraction rather than a meaningful revenue generator. As such, some are raising questions about how Vision Pro fits into Apple’s strategy.

6) ‘Services:’ With a hardware sales payout, Apple’s ability to grow service revenue is critical. Investors are debating whether Apple can maintain its high margins in this segment.

7) ‘Health:’ Apple’s health initiatives, such as Apple Watch’s sleep apnea detection, are exciting, but also bring regulatory risks. According to Needham, investors are worried about legal challenges.

“Many investors fear that contingency lawyers will file lawsuits if Apple’s apps give false readings,” notes Needham.

8) ‘Global Litigation and Regulatory Risks:’ Regulatory scrutiny, particularly around Apple’s closed ecosystem and App Store policies, is also a growing concern. Needham’s report points out that regulators around the world increasingly view Apple’s size and dominance as problematic, with investors asking how this will affect Apple’s bottom line.

9) ‘Deterioration of competitive position:’ Finally, analysts discussed Apple’s product development cycle.

They point out that investors believe the company’s annual product introduction cycle “is too slow given the accelerating pace of technology.”

Interestingly, Apple sees this strategy of “making its own time” — focusing less on competitors — as a strength.