Street expectations are too conservative going into this iPhone launch, says Wedbush's Dan Ives

Key Concepts

iPhone 17 pre-order predictions, Apple's AI strategy, Google Gemini partnership, DOJ ruling impact, iPhone upgrade cycle, Street sentiment, catalysts for stock movement, potential Google deal, tariff implications, China market dynamics.

iPhone 17 Pre-Order Predictions and Market Sentiment

Dan Ives predicts iPhone 17 pre-order activity to be up approximately 5-10% year-over-year compared to iPhone 16 Plus. He believes street expectations are too conservative. The street's sentiment towards Apple is historically low, around 30-33% holds, indicating a potential for a bounce. Ives highlights three factors influencing sentiment: negative sentiment, the need for an external AI partnership, and Tim Cook's handling of tariffs.

Apple's AI Strategy and the Google Partnership

Ives believes Apple will pursue an external AI partnership, likely with Google Gemini. The Google DOJ ruling is seen as a positive catalyst, opening the lane for a deeper collaboration. He suggests the Google DOJ ruling reignited the "candlelight dinner" between Sundar Pichai (Google) and Tim Cook (Apple). A deal with Google is expected before the end of the year, with an announcement of the initial framework.

iPhone Upgrade Cycle and Growth Potential

Ives estimates that 315 million iPhones are four or more years old, indicating significant pent-up demand for upgrades within Apple's 1.5 billion iPhone installed base. He anticipates a 4-5% growth from an iPhone unit perspective, potentially reaching 7-8%.

Catalysts for Stock Movement and Future Expectations

The catalysts for positive stock movement include Cook's engagement with the White House, investments in AI, and the Google DOJ ruling. Ives believes the initial Google deal will be an 8.5 or 9 out of 10, with the "real one" being the game changer in the next year.

DOJ Ruling and Potential for Other Deals

While the Google deal is prioritized, the DOJ ruling allows for other relationships. However, the pole position is crucial, making subsequent deals less impactful. Ives emphasizes the mutual need between Apple and Google, with the existing $20 billion deal potentially increasing to $30 billion or more upon renewal. Apple needs Google's AI, and Google needs Apple's unparalleled installed base.

Conclusion

Dan Ives is optimistic about Apple's future, driven by better-than-expected iPhone demand, a potential Google AI partnership, and a shift in street sentiment. The Google DOJ ruling is a key catalyst, enabling Apple to address its AI shortcomings through external collaboration. The significant iPhone upgrade cycle and Cook's strategic moves further support a positive outlook for the stock.