Bank of America goes against the trend and recommends Apple as its top pick for 2024
Bank of America has listed Apple as its top pick for stocks in 2024. The bank's analysts are optimistic about Apple's performance and prospects, believing it has a rich catalyst path and defensive cash flow. Despite a market capitalization loss of nearly $180 billion and a decline in Apple's stock price, the bank remains bullish on its service revenue growth and strong profit margins. However, a weak demand environment may impact a price pullback. Morgan Stanley has lowered Apple's target price from $220 to $210, expecting Apple to provide disappointing guidance. Wall Street is skeptical about Apple but recommends buying on weakness after earnings
According to the Zhitong Finance and Economics APP, Bank of America has listed Apple (AAPL.US) as its top pick for stocks in 2024, due to its optimistic outlook on the company's upcoming performance and long-term prospects. Bank of America analyst Wamsi Mohan stated that the company has "a rich catalyst path and defensive cash flow," rating the stock as "buy" with a target price of $225.
Apple is scheduled to release its second-quarter financial report next week, and Bank of America is generally optimistic about Apple's prospects, believing that "service revenue growth and profit margins will remain strong." However, Bank of America warned that "weak demand environment and possible guidance downgrade could impact stock price pullback."
Apple's stock price rose by 0.5% on Monday. The stock has just rebounded from its lowest closing point in about a year, after falling by 6.5% in the previous 5 trading days, causing a market capitalization loss of nearly $180 billion. The stock has dropped by 14% year-to-date, making it one of the worst-performing stocks among large-cap tech stocks in the U.S.
Concerns about growth, especially regarding iPhone growth in the key Chinese market, as well as regulatory pressures and a lack of a strategy around artificial intelligence, have weighed on Apple's stock price.
In addition, Morgan Stanley lowered Apple's target price from $220 to $210 on Monday, expecting disappointing guidance from Apple in its earnings release.
Morgan Stanley analyst Erik Woodring stated: "This seems priced in, but in today's volatile market, it's a tricky setup." Considering an upcoming AI-focused event by Apple, the firm recommends buying on post-earnings weakness.
Bloomberg Intelligence also remains cautious. The organization stated that considering weak demand for the iPhone in the Chinese market, Apple's "sales expectations for the third quarter iPhone may be lower than the market's general forecast of a 2% decline." Analyst Anurag Rana added: "This could prolong the company's slow growth and negative sentiment."
While Apple remains a heavyweight stock in benchmark indices, accounting for 5.7% of the S&P 500 index, Wall Street is skeptical about the stock. Among analysts tracked by Bloomberg, only 55% recommend buying the stock, while analysts bullish on Microsoft, Nvidia, Alphabet, Amazon, and Meta Platforms are close to or above 85%.
However, some strategists believe that after this year's decline, Apple still presents an attractive opportunity. Cantor Fitzgerald recently stated that the valuation "has now contracted to a much more reasonable level."
Cantor Fitzgerald's Head of Cross-Asset and Equity Derivatives, Eric Johnston, added: "As inflation intensifies and yields rise, we believe this environment will attract capital towards stocks less sensitive to interest rates, and given Apple's underperformance, we believe it will be a major beneficiary of this rotation."