Bank of America delivers sharp take on Apple stock after major shift

Bank of America is leaning bullish connected Apple (AAPL) banal up of a captious net trial connected Jan. 29. The sharper instrumentality comes close aft a large displacement successful Apple’s AI future, pursuing a breakthrough woody for Siri with Google, a portion of Alphabet (GOOGL).

The slope sees aggregate potent near-term and medium-term catalysts lining up for Apple, spearheaded by robust iPhone 17 demand, double-digit Services gross expansion, and stronger gross margins led by a much lucrative Services mix.

The enactment drops astatine an opportune time, arsenic connected Jan. 12, Apple announced a massive multi-year concern with Google, according to Tech Crunch, placing Gemini AI models successful the heavy of things with Apple Intelligence portion dramatically upgrading Siri.

Over the past mates of years, Apple’s deficiency of AI advancement has go a large overhang connected the stock.

For perspective, the banal posted a nifty 10% gain past year, but lagged the broader market’s 20% gain. Over a longer clip frame, Apple’s delivered implicit 100% summation (5 years), beating theS&P 500’s 84% gain.

Near-term gains, though, for Apple person been awesome at much than 22%.

“This is what the Street has been waiting for,” said Daniel Ives of Wedbush Securities, describing the woody arsenic a large validation infinitesimal for Google and a stepping chromatic for Apple successful pushing for bigger AI-powered wins this twelvemonth and beyond.

BofA besides reiterated a beardown buy rating connected Apple stock, portion keeping a $325 terms target unchanged (implying astir 25% upside from existent levels).

Bank of America feels Apple’s caller underperformance has led to a sizeable disconnect betwixt sentiment and fundamentals starring up to earnings.

The slope expects to person a powerful December quarter, spearheaded by superb iPhone 17 demand, resilient pricing power, on double-digit Services growth, contempt the risks related to representation costs.

Earnings visibility is simply a immense portion of BofA’s bullish setup.

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It models December-quarter income of $140 cardinal and an EPS of $2.69, some comfortably up of the market’s consensus.

Moreover, gross margins are expected to autumn to 47.5%, with stronger sequential enlargement successful the March quarter, arsenic services marque up a larger stock of sales.

• iPhone units: Raised to 85 million for the December quarter, with income up 17% twelvemonth implicit year

• Services: Modeled astatine a superb 13% year-over-year growth, contempt the sluggishness successful App Store trends successful China

• Margins: Seen moving adjacent the 48% people successful March, with semipermanent imaginable supra 50%