Apple’s pullback after Monday’s Worldwide Developers Conference keynote doesn’t shake our confidence in the stock. However, we are not in a hurry to buy on the spur of the moment. “We’re not going to trade Apple. That’s not something you should trade (the stock),” Jim Cramer said at the CNBC Investment Club’s morning meeting on Tuesday. He also cautioned investors to view dips as buying opportunities given the recent rally, noting that “we can’t bottom out here.” Apple shares fell another 3% on Tuesday, adding to a nearly 2% drop in the previous session. The stock was up about 3% just before the expected announcement of a new AI-enhanced Siri at WWDC. By the end of the event, the stock turned lower and remained so until the close of trading on Monday. As investors anticipated Apple’s next move in the artificial intelligence space, the stock price tumbled as the event began, rising 28% from March 30 to its all-time high closing price of $315 on June 2. In our view, this decline says more about investor expectations than Apple’s long-term prospects. Apple’s developer conferences have a history of being “selling news” events, especially when traders bid up the stock in advance in hopes of game-changing announcements. As Jim pointed out on CNBC’s “Squawk on the Street,” Apple was never a company built around big, one-off announcements. “What happens in events like this, and why it’s a bad trading event, is that people get very bullish that they’re going to say something,” he said. “The truth is, Apple is an incrementalist. They’re not a company that shocks you. They give you something better than before.” It’s this careful approach that has allowed Apple to build one of the technology industry’s most loyal customer bases. Despite concerns that Apple’s AI products are lagging behind competitors, Jim said the company’s ecosystem (more than 2.5 billion active devices) remains a strong advantage. You can sell services like Apple Pay, iCloud, and AppleCare to these users, as well as subscriptions and entertainment. “People aren’t going to go from Apple to Samsung because … Wall Street didn’t get what they wanted,” he said. More importantly, there is a clear path to monetizing AI, as a smarter Siri and enhanced Apple Intelligence capabilities could ultimately drive both device upgrades and higher-margin service revenue. “A more intelligent Siri is going to be very important,” Jim said. After WWDC, several Wall Street firms echoed this view. Morgan Stanley raised Apple’s price target to $360 from $330, citing a clearer path to profitability through both hardware and services. The company estimates that more than 850 million iPhones in use today are unable to run basic Apple Intelligence functions, creating a huge opportunity for future upgrades. Melius Research made a similar argument, arguing that Siri AI and Visual Intelligence could drive both future iPhone upgrades and recurring service revenue. The company also highlighted Apple’s large installed base and upcoming product cycle accelerators, including the possibility of a foldable iPhone. Patience remains the right approach for now. Stocks need to calm down after a strong rally as investors process the latest announcement. However, over the long term, we remain positive on the stock as we believe Apple’s expanding AI capabilities are another reason for customers to stay within the ecosystem. Staying within the ecosystem can lead to even more spending. “These are all things people want,” Kramer said. “It’s the service revenue stream that drives the gross margin. And the gross margin drives the stock price. And the next thing you know, you’re buying.” (Jim Cramer’s Charitable Trust is long AAPL. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you’ll receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
