Apple Inc. hasn’t exactly been feeling the love from Wall Street so far this year, but perhaps the tide is turning.
BofA Securities analyst Wamsi Mohan weighed in with a newly upbeat view of Apple’s stock
AAPL,
Thursday, upgrading it to buy from neutral amid longer-term optimism about the iPhone business.
There could be some noisy iPhone headlines early this year, according to Mohan, as his checks found higher iPhone production in the December quarter and potentially lower production in the March quarter, but he says to tune out that noise. The company could benefit from foreign-exchange trends and see weakness in China counteracted by strength elsewhere, in his view.
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Plus, he cheered the potential for a “stronger multi-year iPhone upgrade cycle,” as he thinks people will need new devices to take full advantage of generative artificial-intelligence features. And “anticipation of AI features could induce institutional investors to increase positions.”
Mohan upped his price objective to $225 from $208 in his latest note. Apple shares closed at $182.68 Wednesday.
While Apple’s stock has lagged the S&P 500
SPX
by about 6 percentage points since Mohan’s September 2022 downgrade to neutral, he notes that the stock’s relative multiple to the index, at 1.3 times, is below where it’s been in the past.
“Given the mix shift to services and increasing vertical integration we see more stable [gross margins] significantly north of 40% that can drive the relative multiple higher,” he wrote. “We do not expect the relative multiple [to] compress much lower, especially below 1.2x, which in our opinion would make for an even more compelling reason to own shares of AAPL.”
Shares of Apple were up about 2% in premarket trading Thursday. The stock has lost 5% so far this year.
Mohan’s bullish call goes against the more cautious sentiment shown by other analysts earlier this month. Two analysts downgraded Apple shares at the start of the year, citing concerns about the iPhone business and China market.
