Bank of America says Apple shares could rise about 25%, bucking the wave of skepticism

Bank of America says Apple shares could rise about 25%, bucking the wave of skepticism

Posted: January 18, 2024 at 9:05 AM ET

Apple Inc. did not feel With love from Wall Street so far this year, but the tide may be starting to turn.

BofA Securities analyst Wamsi Mohan commented on a new bullish view on Apple AAPL stock on Thursday, as he upgraded it to buy from neutral amid long-term optimism about the iPhone business.

It is possible that there is some noise in your iPhone…

Apple Inc. did not feel With love from Wall Street so far this year, but the tide may be starting to turn.

BofA Securities analyst Wamsi Mohan commented with a new optimistic outlook on Apple stock

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On Thursday, it was upgraded to buy from neutral amid long-term optimism about the iPhone business.

There could be some loud headlines for the iPhone early this year, according to Mohan, as his checks found a rise in iPhone production in the December quarter and possibly a decline in production in the March quarter, but he says that hype should be avoided. In his view, the company can benefit from foreign exchange trends and see weakness in China offset by strength elsewhere.

is reading: Apple has just ceded one crown to Microsoft, but it has gained a new one

Additionally, he welcomed the possibility of a “stronger multi-year iPhone upgrade cycle,” as he believes people will need new hardware to take full advantage of generative AI features. “Anticipating the advantages of artificial intelligence can motivate institutional investors to increase their positions.”

Mohan raised his price target to $225 from $208 in his last note. Apple shares closed at $182.68 on Wednesday.

While Apple stock lagged behind the S&P 500 SPX

By about 6 percentage points since Mohan’s September 2022 downgrade to neutral, he noted that the index’s relative multiple per share, at 1.3 times, is lower than it was in the past.

“Given the mix shift to services and increased vertical integration, we see significantly more stable (gross margins) up to 40% which could push the relative multiple higher,” he wrote. “We do not expect the relative multiple to compress much lower, especially below 1.2x, which in our view would be a more compelling reason to own AAPL stock.”

Apple shares rose about 2% in pre-market trading on Thursday. The stock has lost 5% so far this year.

Mohan’s bullish call contrasts with the more cautious sentiment other analysts showed earlier this month. Two analysts downgraded Apple shares at the beginning of the year, citing concerns about its iPhone business and the Chinese market.

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