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Apple’s (NASDAQ: AAPL) latest iPhones are ready to start shipping.

As Apple watchers know well, the tech giant releases a new model of its trademark smartphone each September, ahead of the peak holiday selling season, and expectations are high coming into the release of the iPhone 15.

Apple stock has risen roughly 40% this year on a broader recovery in tech stocks, excitement over AI, and anticipation of the upcoming launch of its Vision Pro spatial computing headset, which it unveiled back in June. It is expected to go on sale early next year.

However, Apple’s recent results haven’t packed much punch and show why the company could use a win from the latest round of iPhones.

Revenue fell 1.4% in its latest quarter due to macroeconomic challenges and difficult comparisons with the pandemic era when sales of Macs and iPads surged. Revenue is down 3.4% through the first three quarters of the fiscal year, and profits have fallen as well this year as the company has ramped up spending on research and development. As a result, the stock is trading at a price-to-earnings ratio of 30, even though the company isn’t even growing currently.

However, one analyst thinks that the iPhone 15 launch could be just the catalyst the tech giant needs to spark another rally, carrying the stock up 20%. Wedbush’s Dan Ives predicted that the iPhone 15 would set off a mini super-cycle for Apple, sparking a new round of iPhone buying. Let’s take a closer look at what he had to say.

Image source: Getty Images.

Can the iPhone do it again?

Ives noted that 25% of the iPhone installed base have not upgraded their phones in four years and sees the recent concerns in China as mostly noise — Beijing banned the use of iPhones by government officials, favoring local company Huawei. Ives said the ban is a non-factor, saying that government employees make up less than 500,000 of the 45 million iPhones likely to be sold in the country. The Wedbush analyst noted that Apple has continued to gain market share in China, with momentum likely to build from the newest iPhone launch.

Finally, Ives also sees strength in services continuing to build, which he valued at $1.4 trillion to $1.5 trillion.

A potential price ceiling

Apple stopped sharing data on iPhone unit sales years ago but has reported continued sales growth from its flagship smartphone, which appears to have come mostly from price increases.

Global smartphone shipments actually peaked in 2016 at 1.473 billion, according to IDC, and have declined since then, with 1.15 billion expected to be sold this year. Nonetheless, the market has expanded thanks to steady price hikes. The average smartphone selling price increased 11% annually in the U.S. from $409 in 2016 to $735 in 2022, with much of that increase driven by the iPhone. Apple’s most expensive phone has increased by $550 between the launch of the iPhone X in 2017 and the iPhone 14 release last year.

There are plenty of headwinds to consumer spending in the U.S., including rising interest rates, inflation, and the restart of student loans, and the Chinese economy is still struggling to rebound following the impact of COVID-19 and a crackdown on the tech sector.

Apple raised prices by $100 on its most expensive model, the new iPhone 15 Pro Max with the release of the iPhone 15, and that’s likely to coax more spending out of its least price-sensitive customers, but Apple could encounter more resistance from the middle of the market even as it held prices flat on its other phones as the smartphone market is as weak as it’s been in a long time.

The calls for an upgrade cycle from Ives make sense because iPhone 12 sales spiked, meaning many of its customers are now holding three-year-old phones, but struggling telecoms are also likely to push back on promotions that have led them to subsidize an increasing portion of the iPhone price.

Is Apple stock a buy?

Whether a mini super-cycle plays out remains to be seen, but Apple stock already seems priced to perfection given its sluggish growth. Its price-to-earnings ratio of 30 is greater than the S&P 500‘s at 25.5, and growth expectations remain modest, with analysts expecting 8% earnings-per-share growth in fiscal 2024.

Without double-digit growth from its trademark smartphone or a breakout performance from the Vision Pro, Apple seems unlikely to hit Ives’ target of $230, which implies a 30% jump, in the next year.

Investors are better off waiting for a better price on Apple stock. The broader macroeconomic pressure and declining smartphone sales seem likely to put a ceiling on the stock price, and even Apple seems to understand that it’s the wrong time to raise prices on the majority of iPhone customers.

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Jeremy Bowman 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.

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