BofA upgrades Apple on AI and headset potential, leading to rise in stock
Following a sluggish start to the year, Apple Inc. experienced a boost in its shares on Thursday as Bank of America upgraded the iPhone manufacturer’s rating from neutral to buy, indicating a renewed sense of faith in the company’s stock.
The stock rose 3.3%, its biggest one-day percentage gain since May. It’s still down 2% this year, making it one of the worst performers among the so-called Magnificent 7 megacaps that fueled market gains in 2023.
According to BofA analyst Wamsi Mohan, artificial intelligence will be the driver of the company’s hardware and services business. He wrote that he sees “a stronger multi-year iPhone upgrade cycle due to the need for the latest hardware to enable generative AI capabilities in 2024/2025.”
Mohan also believes that the upcoming launch of Apple’s virtual reality headset has potential, writing that the product’s revenue “may surpass iPad turnovers over time as spatial computing takes over and provides upside-down driving services for various use cases.” It raised its price target to $225 from $208.
Even with Bank of America’s upgrade, Wall Street’s relatively cautious attitude toward the company differs from other megacaps. Only 62% of analysts representing Apple recommend buying the stock, compared to more than 85% for Microsoft, Amazon.com Inc.’s Alphabet Inc., Nvidia Corp. and Meta Platforms Inc.
The stock has received at least three discounts in 2024 as Redburn Atlantic cited valuation issues and both Piper Sandler and Barclays see risks to iPhone sales.
The weakness at the beginning of the year has pushed Apple below Microsoft’s valuation. Apple currently has a market cap of $2.92 trillion, just behind the software giant’s market cap of $2.93 trillion.
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