Bank of America raised its price target for Apple (NASDAQ:AAPL) to $256, up from $230 in a note to clients Thursday, driven by increased confidence in a multi-year iPhone upgrade cycle.
This upward revision is supported by the findings of a comprehensive global smartphone survey and an analysis of Apple's aging installed base, which BofA says suggests significant upside potential.
"We are raising our PO on Apple to $256 on increased confidence of a multi-year iPhone upgrade cycle driven by an aging installed base and GenAI features that should provide a boost to customers' intentions to upgrade," BofA analysts noted.
The survey, conducted across the US, UK, China, and India, indicated that a large portion of iPhone users are still using older models. Specifically, 29% own an iPhone in the iPhone 13 family, 13% own an iPhone in the iPhone 12 family, and more than 31% own an iPhone in the iPhone 11 family or older.
The note highlights that the recent Worldwide Developers Conference (WWDC) has boosted customer intentions to upgrade in 2024. This expectation is further fueled by strong services growth and margin expansion, leading BofA to reiterate its Buy rating for Apple.
The new PO of $256 is based on 30 times the C26E EPS of $8.40, as analysts roll forward their projections by one year.
Apple's customer loyalty remains robust, according to the bank, with 58% of current iPhone users planning to buy another iPhone for their next upgrade. This compares favorably to 53% for Samsung, 38% for Huawei, and 31% for Xiaomi. Despite a temporary dip in interest in China, Apple quickly regained market share.
Additionally, analysts state that median spending on Apple services per month is notable across various regions, potentially driving further growth. Furthermore, interest in wearables, especially the Apple Watch, is said to also be strong, particularly in India and China.