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Investing.com -- Bank of America said the recent pullback in Apple Inc shares offers an “enhanced buying opportunity,” as the stock’s forward price-to-earnings ratio has dropped below 25x, giving favorable risk/reward at this low level.
The declines have been driven by mounting geopolitical concerns over tariffs and delays in AI-related product features, particularly around Siri upgrades.
Apple shares (NASDAQ:AAPL) are down 25.5% year-to-date and 23.5% since its last earnings report, underperforming the broader S&P 500, which is off 13.7% YTD and 16.6% over the same period, BofA noted.
“In our view, the pullback presents a particularly enhanced buying opportunity for investors to own a high-quality name,” analysts wrote reiterating its Buy rating on “APPL’s stable cash flows, earnings resiliency and potential beneficiary of AI use on edge devices”.
Apple shares are trading down 3.14% on Tuesday trading.
According to BofA’s analysis, Apple’s stock has historically delivered positive returns in the months following dips below 25x forward P/E.
The analysts acknowledged that tariff risks and potential escalation with China pose uncertainties.
However, they argued that Apple has multiple levers to manage downside risk, including shifting iPhone production to India, increasing prices, adjusting product cadence, and introducing premium-priced products.
While this time may feel different, Apple’s track record suggests otherwise, the note said.
After the most recent P/E compression in March 2024, Apple’s share price rose 36% in the following 12 months.
BofA concluded that Apple remains well-positioned to benefit from long-term tailwinds in edge-based AI computing, and that investors should “look through near-term volatility” to capitalize on the stock’s compressed valuation.