Apple stock will soar 36% as it gears up to launch an AI-enable iPhone, BofA says (2024)

• Apple stock is a "top pick" for 2024 and could surge 36% from Friday's close, according to Bank of America.
• The bank said Apple has 4 upcoming catalysts this year, including the launch of an AI-enabled iPhone 16.
• "While we acknowledge that the demand environment is weak, we believe the stock is already reflecting this," BofA said.

Apple stock is a "top pick" for 2024 and has potential upside of 36% as it gears up for the launch of an AI-enabled iPhone, according to Bank of America.

The bank reiterated its "Buy" rating and $225 price target for the company, arguing in a Monday note that much of the weakness in its expected earnings growth is already reflected in the stock.

"While we acknowledge that the demand environment is weak, we believe the stock is already reflecting this (-14% YTD) and our aggregate estimates for the year remain relatively unchanged," Bank of America analyst Wasmi Mohan said.

Mohan highlighted four potential catalysts that could help boost the stock from now until year-end, and they kick-off with the company's earnings call next week.

First, Mohan said he expects Apple to increase its capital return to shareholders when the company reports its fiscal second-quarter results. That could come in the form of an increased dividend, an increased stock buyback program, or both. Mohan expects a 5% dividend increase and a $90 billion stock buyback program.

Second, Mohan expects Apple to make a series of AI-related announcements at its upcoming WWDC software developers conference in June. That could excite investors, as Apple has largely been absent from announcing its AI capabilities when compared to its mega-cap tech peers.

Third, Mohan said he expects Apple to launch an AI-enabled iPhone 16 later this year that will offer on-device generative AI capabilities. That should help accelerate the company's earnings power.

"Our checks indicate that all 4 new models of iPhone this year could be launched with the same application processor (A18) that can enable improved AI/machine learning performance," Mohan said.

Finally, Mohan said that Apple's profit margins have considerable upside as the company develops chips in-house, lowering its component costs, and as it reduces its reliance on public cloud providers. Mohan also said that Apple's Services business is poised to see strong revenue growth thanks to its Licensing, App Store, iCloud, and subscription offerings like Apple TV+ and Apple Music.

For its earnings next week, Bank of America expects Apple to beat Wall Street's estimates and predicts the company will report $1 billion in revenue from sales of its Vision Pro.