• Apple stock is a “top pick” for 2024 and can surge 36% from Friday’s close, in response to Bank of America.

• The bank said Apple has 4 upcoming catalysts this 12 months, including the launch of an AI-enabled iPhone 16.

• “While we acknowledge that the demand environment is weak, we imagine the stock is already reflecting this,” BofA said.

Apple stock is a “top pick” for 2024 and has potential upside of 36% since it gears up for the launch of an AI-enabled iPhone, in response to Bank of America.

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

“While we acknowledge that the demand environment is weak, we imagine the stock is already reflecting this (-14% YTD) and our aggregate estimates for the 12 months remain relatively unchanged,” Bank of America analyst Wasmi Mohan said.

Mohan highlighted 4 potential catalysts which may help boost the stock from now until year-end, they sometimes 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 will can be found the form of an increased dividend, an increased stock buyback program, or each. 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 will excite investors, as Apple has largely been absent from announcing its AI capabilities as compared to its mega-cap tech peers.

Third, Mohan said he expects Apple to launch an AI-enabled iPhone 16 later this 12 months that will offer on-device generative AI capabilities. That must help speed up the company’s earnings power.

“Our checks indicate that each 4 recent models of iPhone this 12 months may thoroughly be launched with the similar application processor (A18) that will 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 since it reduces its reliance on public cloud providers. Mohan also said that Apple’s Services business is poised to see strong revenue growth as a result of 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.

Read the unique article on Business Insider