Apple Inc. (NASDAQ:AAPL) received a major vote of confidence from Rothschild Redburn today, with the firm upgrading the stock from Neutral to “Buy” and raising its price target to $400 from $260. The upgrade rests on two major catalysts for Apple: its entry into premium foldables and a strategic reset to the Apple Intelligence platform.
The iPhone Ultra Could Drive the Next Growth Cycle
Apple’s bull case lies within its tight integration of premium hardware, proprietary silicon, and its rapidly expanding services layer. For the near future, analyst James Cordwell anticipates iPhone sales to grow at a 12% five-year annual compound rate, roughly 3-14% above consensus expectations between fiscal 2026 and 2030.
This anticipated increase is backed by Apple’s potential entry into the premium foldables market, particularly with the launch of iPhone Ultra. Not only will Apple gain a new product category with the launch, but will also be able to lift its average selling prices for the broader iPhone lineup.
This thesis is backed by numbers. The analyst firm noted how Apple already boasts a base of 2.55 billion devices, supported by a degree of customer retention only few competitors can rival.
Services is Apple’s Most Valuable Business
The second part of Apple’s bull thesis, according to the firm, is its Services business. The firm believes that it is the most valuable part of Apple’s franchise, growing at roughly three times the rate of Products. The business generates gross margins of roughly 75%, more than double of that earned on Product sales.
This explains why Services has become a major part of Apple’s valuation. Continued growth in the segment can have a considerable impact on profitability. At the same time, the firm has argued how closed-source AI models from OpenAI, Anthropic, and similar companies can change where consumers begin and complete digital activity, in turn impacting its Services segment.
AI: An Opportunity and a Risk
If consumers increasingly begin using AI assistants for their online activities instead of the Apple ecosystem, Apple’s position as a primary gateway for its consumers weakens. However, there is one way around it.
Open-source AI models may allow Apple to revive its Apple Intelligence platform independently, helping it maintain itself as the gatekeeper of consumer AI. This can be done if the company can delegate workloads to a “subservient fleet of open-source models” and monetize AI interactions through Apple Pay and similar payment platforms.
If areas such as search, app discovery, and even transactions shift toward third-party AI assistants, Apple could lose some of the traffic and opportunities for monetization that flow through Apple’s apps and services. While AI platforms do hold the potential of disintermediating Apple’s relationship with customers, the company holds a robust installed base and customer loyalty for now to adapt accordingly.
Bottom Line
According to Insider Monkey’s database, 170 hedge funds held Apple at the end of the first quarter, up modestly from 169 in the prior quarter. As for short interest, Apple has 0.97% to 1% of its total public float, indicating limited bearish sentiment. Besides the favorable hedge fund and investor sentiment, Rothschild Redburn is also optimistic about Apple’s relative valuation multiple, stating that it is well-supported.
Overall, Apple’s $400 bull thesis lies within a mix of higher device prices, incremental unit demand and a potentially more flexible AI strategy. However, this thesis is largely dependent on the company preserving control of its massive ecosystem, while accelerating iPhone growth and executing a strategic AI strategy.
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