Jefferies dissects Apple stock's surge higher

Apple Inc (NASDAQ:AAPL) shares surged 7.26% on Tuesday, one day after its WWDC event, which highlighted its Apple Intelligence AI product. The move in the stock came as a shock to many, as the event was largely as expected. Analysts at Jefferies highlighted how rare the move in Apple's stock was, noting that it was a 5.5 standard deviation event.

Overall, analysts at the firm view the response in the stock as a combination of underweight positioning, "coupled with a lot of overnight commentary around new AI products (i.e. Apple Intelligence) helping spark more upside to the next iPhone cycle."

While there is much debate about the exact reason for the move, Jefferies notes that the following is worth highlighting as Apple is a $3 trillion name.

Analysts highlight:

• This was the largest outperformance relative to QQQ since July 2020.
• This was the third largest 1-day relative move to QQQ in the last 15 years.
• This was the fifth largest notional amount traded in the last 25 years; the other four came in 2020.
• The stock saw the largest 1-day call volume since November 2021.

Further, the analysts highlighted that two stocks (AAPL&NVDA) made up 20% of the total options volume market-wide on Tuesday.

"Both stocks saw >50% of today's options flows in June 14th paper, meaning almost 4M 3 day options traded in AAPL&NVDA today," analyst note.

 While Wall Street analysts were overall mixed on the event, two comments stood out on Tuesday which could help explain investors' thinking:

Rosenblatt "Apple sells over 200 million iPhones a year, and has an iPhone installed base of over 1 billion devices. But only about 10% of the installed base is the high-end iPhone 15 Pro and Pro Max models that use Apple's A17 Pro chip. But that chip, and presumably newer ones to come, is what's required to access the new AI features Apple outlined at its WWDC presentation Monday."  The firm rates Apple a Neutral.

DA Davidson: "Another Napster to iTunes moment. We believe yesterday's presentation rhymes with one of Apple's previous milestone moments — the transition of digital music from a standalone app with questionable regulatory standing (i.e. Napster) to an experience integrated into existing consumer applications (i.e. iTunes). We believe the integration of summarization, enhanced search, multi-modality, text generation, and enhanced photo editing into the exiting ecosystem will drive much broader adoption of AI than we have seen to date. Apple is also the first to introduce a meaningful agent capability that will allow Siri (and beyond) to execute tasks on behalf of the user. Importantly, Apple is uniquely positioned to offer these capabilities, and may be the only one capable of doing so any time soon. Because Apple has not only the consumer's information, but also their trust, it can deliver the above deeply integrated functionality in a way that standalone chat applications, PCs, and Android devices may not be able to fully replicate."  DA Davidson upgraded the stock to Buy following the event.