Investing.com– Wedbush said on Wednesday that recent weakness in shares of Apple Inc (NASDAQ: ) — amid a series of downgrades and deteriorating sales in China — was overblown, especially ahead of the company’s December quarterly earnings.
Apple shares have fallen 12% over the past month, as recent data showed the company has lost even more market share in China’s mobile phone market. That prompted two downgrades for the stock this week.
But Wedbush analysts said that while Chinese demand is falling, they view the overall unit decline in the region as “manageable,” and that strength in other markets will allow Apple to at least meet Street estimates for the December quarter.
Wedbush also expects Apple’s services revenue to remain strong, offsetting headwinds from declining device sales. The company will report earnings for the December quarter next week.
The brokerage kept Apple in an outperform position with a price target of $325, representing a 45.2% upside from the stock’s close on Wednesday.
Wedbush praised the potential in Apple Intelligence – the company’s artificial intelligence offering, stating that its continued rollout will drive growth for the service in the coming years.
“What the bears continue to miss in Apple is its unrivaled golden installed base of 1.5 billion iPhones and 2.3 billion iOS devices, and will create a new AI-driven growth story that the Street is not factoring into the stock,” the analysts wrote Wedbush in note.
However, they also noted that Apple’s stock is expensive by historical standards, but that the recent stock selloff provided a “golden opportunity” to buy, in the hope that its AI ambitions will pay off.
Apple’s finding an AI partner in China is also expected to further this trend, Wedbush said. Recent reports say the company is in talks with Chinese internet giants including Tencent, Baidu (NASDAQ: ) and ByteDance to use their AI models on their devices.
Apple has yet to introduce its AI features to Chinese devices due to regulatory hurdles. The company has also largely lagged behind its global rivals, particularly Samsung ( KS: ), in incorporating AI features into its flagship devices, particularly the iPhone.
In China, Apple is grappling with increased competition from local handset makers such as Xiaomi ( OTC: ) and Huawei, which have unveiled a number of competing offerings over the past year.
