Recent speculation has suggested that Apple might consider acquiring an AI search engine, such as Perplexity, to bolster its position in the artificial intelligence sector. However, Morgan Stanley analyst Erik Woodring has expressed skepticism about this strategy, labeling it as misguided. Woodring argues that Apple does not intend to compete directly in the search engine market and that such an acquisition may not align with the company’s long-term objectives.
In an investor note, Woodring acknowledged Apple’s challenges in the AI domain but emphasized that the company’s approach to AI-driven features is a long-term endeavor. He noted that significant updates related to Apple Intelligence are unlikely in the upcoming September quarter, suggesting that Apple’s AI advancements will unfold over an extended period.
Despite these challenges, Morgan Stanley maintains a positive outlook on Apple’s financial performance. The firm has raised its revenue forecast for the fiscal third quarter to $90.7 billion, representing a 5.8% year-over-year increase. This optimistic projection is attributed to stronger-than-expected iPhone shipments, higher average selling prices, and continued strength in iPad and Mac sales.
The services segment is also expected to perform well, with projected revenue growth of 11.6% year-over-year. This is despite investor concerns stemming from a recent App Store injunction and Apple’s decision not to issue guidance during its last earnings call. Morgan Stanley sees no signs of a slowdown in this area.
Woodring maintains an Overweight rating for Apple, indicating confidence that the stock will outperform the broader market. He has set a price target of $235, which is higher than recent targets set by other financial institutions, such as HSBC ($220) and JPMorgan ($230).
In summary, while there is ongoing speculation about Apple’s potential acquisition of an AI search engine, Morgan Stanley advises against this move. The firm believes that Apple’s AI strategy is a long-term play that does not involve direct competition in the search engine market. Additionally, Morgan Stanley remains optimistic about Apple’s financial performance, citing strong hardware sales and a robust services segment.
