Why BofA Securities Sees Another 25% Upside in Apple Stock

Apple Inc. (NASDAQ: AAPL) stock has pulled back from its highs back in January and over the past month the stock appears to be in a holding pattern. One analyst thinks that the risk/reward balance is fairly neutral for the stock but it still has some room to run from here.

BofA Securities reiterated a Neutral rating with a $155 price target, implying upside of 26.5% from the most recent closing price of $122.54.

The brokerage firm noted that Apple’s management recently has been focused on expanding the iPhone product set to include a broader range of phones catering to a wider set of price bands, and continuing to reduce prices on older iPhones, which has led to the introduction of more capable phones (with faster processors, larger screens, better cameras, and better battery life) at the lower price bands.

The firm continued by saying that the result of these actions, along with installment plans introduced by Apple and carriers, has led to the iPhone installed base reaching record levels, growing beyond 1 billion devices, with Apple today offering phones ranging in price from $399-$1,399.

BofA Securities further detailed in its report:

Impressively, however, consolidated Apple gross margins have been relatively resilient given the mix of Services gross margins and more recent FX tailwinds. Strategy to broaden price points across all devices Apple has introduced lower end devices across its portfolio (iPhone mini, iPad Mini, Watch SE, HomePod Mini) but has been careful to segment the higher end with “Pro” models (iPhone Pro/Max, iPad Pro etc.). Monetization across the installed base is bullish Given the efforts to broaden the portfolio and price points, Apple has grown its installed base of devices meaningfully. At the same time, the monetization of services revenue per installed base device has climbed meaningfully over time. As Apple offers more services (Fitness +, TV+, iCloud, App Store etc.), we expect a continued increase in monetization per user in the installed base.

Excluding Wednesday’s move, Apple stock had underperformed the broad markets, down about 8%, year to date. In the past 52 weeks, the share price was about 118% higher.

Apple stock traded at $122.32 on Wednesday, in a 52-week range of $59.22 to $145.09. The consensus price target is $152.06.

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