-
According to Bank of America, Apple stock is a “top stock” in 2024, with the potential to rise 36% from Friday's closing price.
-
The bank said Apple has four upcoming catalysts in place this year, including the launch of the AI-powered iPhone 16.
-
“While we acknowledge that the demand environment is weak, we believe the stock price already reflects this,” BofA said.
Bank of America says Apple stock is a “strong favorite” in 2024, with room for a 36% upside as it prepares to launch AI-powered iPhones.
In a note Monday, the bank reiterated its Buy rating and $225 price target on the company, arguing that much of the weakness in expected earnings growth is already reflected in the stock price.
Bank of America analyst Wasmi Mohan said: “While we acknowledge the weak demand environment, we believe stock prices are already reflecting this (-14% year-to-date) and this year's total “Forecasts remain relatively unchanged.”
Mohan highlighted four potential catalysts that could help push the stock higher from now until the end of the year, starting with the company's earnings release next week.
First, Mohan said he expects Apple to increase its return on equity when it releases its second-quarter results. That could come in the form of higher dividends, increased stock repurchase programs, or both. Mohan expects a 5% dividend increase and a $90 billion share buyback program.
Second, Mohan expects Apple to make a series of AI-related announcements at the software developer conference WWDC in June. This could excite investors, since Apple has made few announcements about its AI capabilities compared to mega-tech companies.
Third, Mohan said he expects Apple to launch an AI-enabled iPhone 16 later this year, which will offer on-device generative AI capabilities. That should help accelerate the company's profitability.
“Our research shows that all four new iPhone models this year are likely to launch with the same application processor (A18) that enables improved AI/machine learning performance,” Mohan said. ” he said.
Finally, Mohan said Apple's margins have significant room to increase as the company develops its own chips to lower component costs and reduce dependence on public cloud providers. Mohan also said that Apple's services business is expected to see significant revenue growth thanks to licensing, the App Store, iCloud and subscription services such as Apple TV+ and Apple Music.
Bank of America expects Apple to beat Wall Street's expectations for next week's earnings, with Vision Pro sales of $1 billion.
Read the original article on Business Insider
