Apple(NASDAQ: AAPL) reported earnings results for the March-ending quarter consistent with Wall Street's expectations, but investors were quick to brush off the company's weak revenue performance. The share price closed yesterday at $173, but jumped 6% today following positive commentary on the earnings call around Apple's artificial intelligence (AI) opportunities.
Bank of America today kept a buy rating on the shares and bumped its price target from $225 to $230. Let's dive deeper into the reasons behind the call.
Why Apple stock is up
Apple posted revenue of $90.8 billion in the quarter, down 4% year over year, driven by declines in iPhone, iPad, and wearables, home, and accessories. Mac and services were the only two categories that reported growth in the quarter, but BofA analysts see a strong sales cycle upcoming for the iPhone that could boost Apple's growth.
Specifically, BofA sees a long-term upgrade cycle coming in iPhone driven by generative AI. The analysts also see other catalysts benefiting the stock, such as services growth, margin expansion, and Apple's ongoing capital returns to shareholders.
The AI opportunity is a hot catalyst to watch. CEO Tim Cook stated on the earnings call that the company is "very bullish" on its opportunities in generative AI and plans to make significant investments in the technology.
With respect to AI, Cook added that Apple will be sharing "very exciting things with our customers soon."
Is the stock a buy?
The stock trades at a forward price-to-earnings ratio of 26, which is expensive for a company that isn't reporting earnings growth right now.
While it might take a year or longer for the stock to reach the $230 price target, the stock offers even more upside for long-term investors. Apple could become the best in the world at monetizing AI given its growing installed base of over 2.2 billion active devices.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Bank of America. The Motley Fool has a disclosure policy.
