Apple Earnings: Bulls vs. Bears! HSBC Upgrades to Buy, Target Soars to $366; Shorts Warn Valuation Overheated

Apple is set to report its latest quarterly earnings on July 30, 2024, with market sentiment sharply divided over its AI strategy and new product roadmap.

HSBC has recently upgraded Apple’s rating from 'Hold' to 'Buy' and significantly raised its price target from $260 to $366, arguing that Apple Intelligence and the next-generation AI-powered Siri will drive a new wave of iPhone upgrades—potentially pushing the company toward a $5 trillion market cap. However, institutions like KeyBanc caution that the stock is overvalued and warn of downside risk if earnings or AI progress fall short of market expectations.

HSBC analyst Nicolas Cote-Colisson stated that Apple (AAPL-US) is at an operational inflection point. Unlike cloud-heavy AI players such as Microsoft (MSFT-US), Alphabet (GOOGL-US), Amazon (AMZN-US), and Meta Platforms (META-US), which require massive capital expenditures for AI data centers, Apple is expected to keep its 2026 capital spending at just 2.5% of revenue. This 'light-asset AI model' allows Apple to deploy Apple Intelligence and AI Siri directly across its existing device base—approximately 2.5 billion active units—enabling rapid edge-AI commercialization without significant additional investment.

Despite recent corrections in AI-related stocks following new model releases from Chinese AI startup Moonshot AI, Apple’s share price has remained resilient. Since late June, it has risen over 20%, hitting new all-time highs and reclaiming the title of the world’s most valuable company with a market cap of approximately $4.9 trillion, briefly surpassing NVIDIA (NVDA-US).

In contrast, the Philadelphia Semiconductor Index (SOX) has declined about 19% from its June peak, signaling a cooling in AI chip stocks and a shift in capital toward large-cap tech firms with strong end-user AI applications.

HSBC highlights Apple’s advantage in its 'light-asset AI model.' While cloud giants invest heavily in infrastructure, Apple leverages its installed base to monetize AI at the device level. Recent progress in overcoming regulatory hurdles in China further supports the rollout of AI features, potentially boosting iPhone upgrade demand.

Beyond AI, new products are seen as another key catalyst. Market expectations point to Apple launching its first foldable iPhone as early as September. The high-priced device is expected to offset rising costs in DRAM and NAND flash memory.

According to Japanese media reports, Apple has instructed its supply chain to increase foldable iPhone production to around 10 million units for 2024—up from earlier market estimates of 7–8 million. Morgan Stanley (MS-US) believes Apple’s strong brand loyalty and pricing power will allow it to maintain profitability despite rising memory costs through strategic price adjustments.

Market forecasts suggest Apple’s DRAM procurement costs could rise cumulatively by about 370% between 2025 and 2027, with NAND costs increasing by approximately 280%. However, Apple’s premium product strategy is expected to absorb some of this cost pressure.

Wall Street remains divided. Only about 60% of analysts covering Apple rate it a 'Buy,' significantly lower than the over 90% 'Buy' ratings for AI leaders like Microsoft, Amazon, Meta, and NVIDIA.

Bloomberg data shows the average price target for Apple is around $322—slightly below recent trading levels—indicating many analysts believe current valuations already reflect future growth.

KeyBanc Capital Markets downgraded Apple to 'Underweight' this month with a $250 target, warning of over 20% downside risk. The firm notes Apple’s current P/E ratio of 35–36x is well above the S&P 500’s average of 20x and that technical indicators suggest overbought conditions. Any shortfall in earnings, AI adoption, or foldable iPhone demand could trigger a sharp correction.

Short-side analysts also express concern over lengthening global smartphone replacement cycles and U.S. carriers reducing phone subsidies, which may dampen demand for high-end iPhones. Additionally, while shifting supply chains to India and Vietnam reduces geopolitical risk, it may increase manufacturing costs in the short term, pressuring margins.

The July 30 earnings report is widely seen as a critical test of Apple’s AI monetization. If Apple Intelligence rolls out smoothly and foldable iPhone demand exceeds expectations, the path to a $5 trillion valuation strengthens. Conversely, if AI-driven upgrades are limited and valuations remain stretched, a correction may follow.