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Apple stock is a “top pick” for 2024 and could jump 36% from Friday’s close, according to Bank of America.
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The bank said Apple has 4 catalysts coming this year, including the launch of an AI-enabled iPhone 16.
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“While we recognize that the demand environment is weak, we believe the stock already reflects this,” BofA said.
Apple The stock is a “top pick” for 2024 and has 36% upside potential as it prepares for the launch of an AI-enabled iPhone, according to Bank of America.
The bank reiterated its “Buy” rating and $225 price target for the company, arguing in a Monday note that much of the weakness in its expected earnings growth is already reflected in the stock.
“While we recognize that the demand environment is weak, we believe the stock already reflects this (-14% year-to-date) and our overall estimates for the year remain relatively unchanged,” said Wasmi Mohan, analyst at Bank of America.
Mohan highlighted four potential catalysts that could help boost the stock between now and the end of the year, and they will kick off with the company’s earnings call next week.
First, Mohan said he expects Apple to increase its return on capital for shareholders when the company reports its second-quarter financial results. This could take the form of an increase in dividends, an increased share buyback program, or both. Mohan expects a 5% dividend increase and a $90 billion share buyback program.
Second, Mohan expects Apple will make a series of AI-related announcements at its upcoming WWDC software developers conference in June. This could excite investors, as Apple has been largely absent when announcing its AI capabilities compared to its large-cap tech peers.
Third, Mohan said he expects Apple to launch an AI-enabled iPhone 16 later this year, which will offer generative AI capabilities on the device. This should help accelerate the company’s earnings power.
“Our checks indicate that all 4 new iPhone models this year could launch with the same application processor (A18), which can help improve AI and machine learning performance,” Mohan said.
Finally, Mohan said Apple’s profit margins could increase significantly as the company develops chips in-house, thereby lowering its component costs and reducing its reliance on public cloud providers. Mohan also said Apple’s Services business is poised for strong revenue growth thanks to its licensing, App Store, iCloud and subscription offerings like Apple TV+ and Apple Music.
For next week’s earnings, Bank of America expects Apple to beat Wall Street estimates and predicts the company will report $1 billion in revenue from sales of its Vision Pro.
Read the original article on Business Insider
