BofA raises Apple stock price target to $265, maintains Buy rating

On Friday, BofA Securities updated its outlook on Apple stock (NASDAQ:AAPL), raising the price target to $265 from $253, while reaffirming its Buy rating. The adjustment reflects a positive stance on the tech giant’s prospects, despite concerns surrounding iPhone demand. With a market capitalization of $3.57 trillion, Apple trades at a P/E ratio of 39.24x, suggesting premium valuation levels. According to InvestingPro analysis, the stock appears overvalued relative to its Fair Value estimates.

Analysts at BofA Securities highlighted that Apple’s guidance for the March quarter was more optimistic than expected, countering the prevalent investor anxieties. The firm’s analysis suggests that the introduction of Apple Intelligence in certain regions has spurred upgrades, contributing to robust sales performance in the first fiscal quarter.

The gross margin guidance for the second fiscal quarter was notably strong, projected at 46.5-47.5%, despite including the impact of foreign exchange headwinds of 70-80 basis points. BofA Securities anticipates product gross margins to improve further, driven by Apple’s increasing vertical integration. This guidance aligns with Apple’s current gross profit margin of 46.21% and its demonstrated ability to maintain strong profitability. InvestingPro subscribers can access 12+ additional key metrics and insights about Apple’s profitability trends.

Apple’s diverse product lineup and services are seen as well-equipped to withstand variations in macroeconomic demand. In addition, the company continues to demonstrate formidable cash generation capabilities. BofA Securities pointed out that Apple’s management is committed to capital returns, which, combined with steady cash flows and earnings resilience, underpins the decision to reiterate the Buy rating.

The firm also mentioned the potential for Apple to benefit from the growing use of artificial intelligence (AI) on edge devices. This aspect of "AI optionality" is seen as an additional factor supporting the positive outlook on Apple stock. InvestingPro data shows Apple maintains a strong financial health score of 2.83 (GOOD), with consistent dividend growth of 4.17% and a track record of 13 consecutive years of dividend payments, underlining its financial stability as it pursues AI innovations.

In other recent news, Apple’s financial performance has been the subject of various analyst reports. UBS maintained a neutral rating on Apple, noting a slight decline in iPhone revenue to $69.1 billion, slightly below the Visible Alpha Consensus estimate. TD Cowen raised its stock target for Apple to $290, referencing the company’s guidance for low to mid-single-digit percentage year-over-year growth for the upcoming quarter.

Piper Sandler maintained a neutral rating on Apple stock, with a consistent price target of $225, pointing to challenges with iPhone revenue and performance in China. However, Evercore ISI increased the price target for Apple to $260, following a recent earnings report that exceeded market expectations despite a challenging demand environment in China.

DA Davidson reiterated its buy rating on Apple shares and raised the price target from $260 to $290, emphasizing the positive impact of Apple Intelligence on iPhone sales growth. KeyBanc Capital Markets maintained its underweight rating on Apple shares, highlighting a slight decline in iPhone sales year-over-year and a decrease in sales in China. These are the recent developments for Apple.

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