Shares of consumer technology juggernaut Apple (NASDAQ:AAPL), known globally for the iPhone and other smart devices, popped higher on Thursday due to an analyst upgrade. Specifically, Bank of America’s Wamsi Mohan sees intriguing growth catalysts that should help power AAPL stock forward despite certain challenges.
According to a CNBC report, Mohan upgraded AAPL to “buy” from “neutral” while raising the price target to $225 per share. That implies a 23% upside from Wednesday’s close. Notably, AAPL stock gained over 1% in the premarket session following the call. In the late morning hours in the open market, it had gained over 3%. Per the underlying research note, Mohan stated the following:
“We upgrade Apple to Buy from Neutral, given: 1) stronger multi-year iPhone upgrade cycle driven by need for the latest hardware to enable Generative AI features to be introduced in 2024/2025 (large part of installed base still on iPhone 11), 2) higher growth in Services as Apple better monetizes its installed base.”
Later this year, the BofA analyst expects Apple to integrate artificial-intelligence-powered features in its iOS 18 operating system. Also, the upcoming Vision Pro mixed-reality headset “could surpass iPad revs over time as spatial computing takes hold offering differentiated use cases driving services upside.”
Per CNBC, the tech giant unveiled the headset last year. It will launch in the U.S. on Feb. 2 with a price of $3,500.
AAPL Stock Enjoys Several Growth Narratives
To be sure, AAPL stock isn’t without its challenges. For one thing, the consumer economy in China faces serious headwinds. According to a Bloomberg report a few days ago, the nation’s worst deflation streak in 14 years sparked a decline in consumer prices, reflecting weak demand. With China representing a key market for both Apple and myriad other companies, it’s not an ideal development.
Also, AAPL stock incurred some weak performances across recent sessions. Conspicuously, even with BofA’s upgrade, shares are down about 4% in the trailing month. Also, these declines stemmed partly from downgrades from Piper Sandler and Barclays. Per CNBC, the former entity cited worries around valuation, while the latter stated that key products (including the iPhone) have experienced weaker sales volume.
Nevertheless, Mohan counters that the red ink makes AAPL stock attractive from a valuation standpoint relative to the S&P 500. Also, the negativity could now be baked into the price. Finally, while the China weakness presents a challenge, it’s also “largely offset by strength in other countries.”
As well, AAPL stock may enjoy several key growth catalysts:
- Generative AI could grow at a compound annual growth rate (CAGR) of 42% to hit $1.3 trillion by 2032, per Bloomberg.
- Global wearable tech could rise at a CAGR of 14.6% to revenue of $186.14 billion by 2030, per Grand View Research.
- Mixed reality could expand at a CAGR of 14% to reach $3.5 billion by 2030, per Rationalstat LLC.
Combined with potential improvements in Services monetization, AAPL stock could conceivably hit the new price target.
Why It Matters
Other analysts are generally enthusiastic about AAPL stock, though it’s not a clean assessment. While the rating is a consensus moderate buy, it breaks down as 24 buys, eight holds and, conspicuously, one sell. Lastly, the average price target lands at $203.89, implying a bit over 8% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
