Bank of America raises Apple price target because of Vision Pro
After weeks of analysts downgrading Apple, Bank of America has raised its price target from $208 to $225 on the strength of both iPhone and Apple Vision Pro.
Side view of the Apple Vision Pro
In a reversal of Barclays, which cited weak iPhone demand as a reason to downgrade Apple, BofA's Wamsi Mohan sees increased production as justification to raise the company's price target. The news comes as Apple begins taking pre-orders for its new Apple Vision Pro, but Mohan's reasoning is centered as much on the iPhone and future use of generative AI.
According to Mohan, in a note seen by MarketWatch, there is now the potential for a "stronger multi-year iPhone upgrade cycle." Specifically, he expects that interest in AI will spur users to buying new devices that can utilize it.
With more upgrades being bought, Mohan says that consequently "anticipation of AI features could induce institutional investors to increase [their] positions."
Mohan says that if Vision Pro and Apple's concept of spatial computing is a success, he believes the headset could grow to be a greater source of revenue than the iPad.
In September 2022, Mohan downgraded Apple to Neutral and has now changed that Buy. But he does note that the stock has fallen in recent years.
"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 said. "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."
According to MarketWatch, shares in Apple rose almost 2% in pre-market trading on January 19, 2024.
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Comments
At the end of Sept '22, Apple was selling for about $140/share. Today it's about $190. So if you had listened to Mohan's last pronouncement on AAPL, you would have missed a run-up of 35% in 16 months. Which is a pretty fantastic return-on-investment! And now, after missing this 35% runup, Mohan is slapping a "Buy" recommendation on AAPL. Unbelievable. And to tie his upgrade of AAPL to Vision Pro is borderline malpractice. Hey, I'm bullish on the future of Vision Pro, but its success is FAR from assured and even it it is ultimately successful, it will likely be a few years (at least) before it becomes a significant driver of revenue. A website called TipRanks actually keeps score on every analyst's predictions and, generally speaking, the percentage of times in which most analysts are correct is ABYSMAL. It makes you wonder how they keep their jobs when they are so bad at it. You would do far better with a coin flip than listening to most analysts regardless of which direction they say a stock is going.