Contrary to the market, Bank of America once again includes Apple in its top picks for US stocks
Bank of America has included Apple in its "US 1 List" of preferred stocks, replacing Jazz Pharmaceuticals. The bank has upgraded Apple's rating and predicts an increase in its future sales and service revenue. Previously, several institutions had downgraded Apple's rating. This news may have an impact on Apple's stock price.
Zhitong App has learned that on Tuesday, Apple replaced Jazz Pharma and was included in Bank of America's "US 1 List". The US 1 List gathers the best investment targets from the bank's "buy" rated stocks. Bank of America stated that although Jazz Pharma was removed from the list, its rating remains as "buy".
Last week, Bank of America analyst Wamsi Mohan released a report, upgrading Apple's rating from neutral to buy and significantly raising the target price from $208 to $225. Mohan pointed out that artificial intelligence and the upcoming Vision Pro could bring upside potential to Apple's services and hardware revenue.
Furthermore, the bank stated that Apple's generative AI capabilities in the next two years could bring a stronger multi-year upgrade cycle. The analyst added that with the development of spatial computing, Apple will provide differentiated use cases and drive the growth of its services business. Over time, the revenue from Vision Pro may surpass that of the iPad.
The analyst also raised Apple's sales estimates, with projected figures for the fiscal years 2024, 2025, and 2026 at 233 million, 250 million, and 250 million units, respectively. The previous estimates were 231 million, 244 million, and 230 million units. The projected service revenue for the fiscal years 2024 and 2025 is $107 billion and $110 billion, respectively, compared to the previous estimates of $95 billion and $97 billion.
Prior to Bank of America's rating upgrade, several institutions had downgraded Apple's rating in January. Barclays, which caused a significant drop in Apple's stock price, downgraded its rating from hold to sell, marking the first time since 2019 that Barclays has lowered its rating on Apple. Piper Sandler's Chief Analyst Harsh Kumar also downgraded Apple's rating from buy to neutral in a report. Earlier, Redburn Atlantic analyst James Cordwell also downgraded Apple's rating from buy to neutral.
Data shows that as we enter 2024, Apple has become the least recommended large-cap tech stock by analysts. After Piper Sandler's rating downgrade, the proportion of analysts bullish on Apple reached a three-year low. In the past four quarters, Apple was the only large-cap tech stock to experience revenue decline. The factors mentioned by these analysts for the rating downgrades include overvaluation, macro headwinds leading to weak Apple demand, accelerated slowdown in services business growth, increased regulatory risks, and diminishing returns from the ecosystem.