11:48 AM EDT, 06/28/2024 (MT Newswires) -- Apple's ( AAPL ) new artificial intelligence technology is likely to help accelerate earnings and revenue growth, Oppenheimer said Friday.

At its Worldwide Developers Conference held earlier this month, the iPhone maker announced a partnership with Microsoft ( MSFT ) -backed OpenAI's generative AI chatbot ChatGPT and a number of AI features debuting as Apple Intelligence across its devices and operating systems.

The introduction of its own AI platform is expected to place Apple ( AAPL ) as the leader in the "consumer AI experience," Oppenheimer analysts Martin Yang and Andrew Northcutt said in a Friday note to clients. "The surprisingly deep integration of AI functions in upcoming iOS18 eliminate concerns that Apple ( AAPL ) is falling behind on AI."

At the WWDC event, Apple ( AAPL ) Chief Executive Tim Cook called Apple Intelligence the "new personal intelligence system" that makes products and apps within the Apple ( AAPL ) ecosystem more useful, and referred to AI as the "next big step" for the company. "We suspect that WWDC showcased only a fraction of what Apple Intelligence could do in the future," the Oppenheimer analysts said.

The brokerage said it sees Apple's ( AAPL ) consumer reach, vertical integration and consumer trust as the main advantages against other consumer hardware and services peers. The roll out of Apple Intelligence could result in more iPhone users upgrading earlier in fiscal 2025 and 2026. Oppenheimer sees upside to its current assumption that 17% of an iPhone installed base this year will upgrade. A 1% incremental gain on upgraders is likely to create incremental iPhone demand of 12 million units, or less than $11 billion in incremental sales, according to the note.

"We believe Apple's ( AAPL ) solution to bring AI to consumers, alongside its unique ecosystem advantage, would result in faster-than-expected acceleration of revenue and EPS growth," Yang and Northcutt wrote. Apple Intelligence is expected to generate "even stronger synergies" between the company's hardware products, they said. "Better hardware synergy enables Apple ( AAPL ) to create a wider and deeper moat once a user enters the ecosystem through iPhone, Mac, iPad, or Apple TV."

The brokerage increased its price target on the Apple ( AAPL ) stock to $250 from $200 while reiterating its outperform rating. Oppenheimer increased its fiscal 2025 EPS and revenue outlook to $7.79 and $438.79 billion, respectively, from $7.35 and $413.8 billion.

The new outlook is 7% and 6% higher than Wall Street's estimates for EPS and revenue, respectively, though a slower-than-estimated Apple Intelligence rollout could pose a "key risk" to that forecast, the analysts said. "Apple Intelligence will stay in beta longer than the rest of iOS18," the duo wrote. Limited support for languages and uncertainties of the platform's release in the European Union and China could delay device upgrades.

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