Apple's AI-Driven iPhone Updates Spark Analyst Optimism and Potential Stock Surge

Analyst Ups Apple's Price Target To $256, Says New AI Features Will Encourage Users To Upgrade To Newer iPhones: 'People Were Looking For A Real Reason...' - Apple (NASDAQ:AAPL)

Bank of America Securities analyst, Wamsi Mohan, has revised his price target for Apple Inc. AAPL upwards to $256 from the previous $230. The adjustment is based on the potential for an upgrade cycle propelled by AI features. What Happened: On Friday, while appearing on CNBC's Squawk Box, Mohan said that the incorporation of AI features will encourage users with older iPhones to upgrade. He noted that the intent to purchase iPhones in 2024 has seen a significant surge following the WWDC event, suggesting that consumers are seeking a compelling reason to upgrade. "Our survey shows that after WWDC, the purchase intentions of buying an iPhone in 2024 went up meaningfully," he said, adding, "People were looking for a real reason to upgrade ... you now have generative AI coming to the iPhone." See Also: As Tesla Surges 44% In 10 Sessions, Bearish Analyst Smells Stock Manipulation: 'They Keep Buying Puts To Cause Inorganic Buying' Why It Matters: Earlier this week, Bank of America released a survey result suggesting that the majority of iPhone users are slow to upgrade their devices. iPhone sales are crucial for Apple, representing over 50% of the company's revenue in the second quarter. The survey, which included over a million iPhone users from the U.S., the U.K., India, and China, revealed that less than a quarter of iPhone users purchased their devices within the past three years. About 29% of users own an iPhone from the iPhone 13 series, released in September 2021, while 13% own an iPhone from the iPhone 12 series, released in October 2020, and 31% have an even older iPhone, reported Yahoo. Read Next: The Market Did Something Thursday That Has Only Occurred 4 Times In History Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors. Image Via Shutterstock Market News and Data brought to you by Benzinga APIs

Apple stock to rise 11% BofA analysts predict, fueled by upgrades to AI iPhone

Bank of America analysts reiterated "Buy" ratings for Apple stock in a note to investors on Thursday. The optimistic outlook stems from the bank's latest global smartphone survey, which reveals a commitment among iPhone users to upgrade, in light of new generative AI features and high numbers of outdated models currently in circulation. Currently trading at $231 as of Friday morning EST, BofA analysts have raised their price objective to $256. The predicted 11% price jump is due to "increased confidence of a multi-year iPhone upgrade cycle driven by an aging installed base and GenAI features," the analysts wrote. Placing second on the S&P 500 Index, Apple's market capitalization of $3.49 trillion represents a staggering 7% of the index's total weight. The consumer tech behemoth has enjoyed gains of 23% year-to-date, largely due to the anticipated launch of the iPhone 16 in September, that will offer on-device generative AI capabilities. "Generative AI and AI are big opportunities for us across our products," CEO Tim Cook said during the company's earnings call for the second quarter of this year. The so-called "Apple Intelligence" features coming soon to iPads, iPhones and Mac, will involve generative AI features for writing, editing, image creation, and organization. The Bank of America survey on iPhone adoption was based on a poll of over 1 million respondents across the US, China, India, and the UK. The upgrade cycle is critical for Apple. In Q2, iPhone sales accounted for half of revenue. Last month, Raymond James analyst Srini Pajjuri told Barron's that for every 1% of installed iPhones that upgrade to newer models, Apple could see a 20-cent boost to its earnings per share. The survey found that during the Worldwide Developers Conference, Apple's annual tech conference held in June, the percentage of respondents who reported plans to upgrade their smartphone this year increased by 4%, which the analysts describe as "bullish." Moreover, the results found that a "significant number of iPhone users are still using older models," with 73% owning an iPhone 13 or older. Adding to the analysts' confidence in the multi-year upgrade cycle, the survey found that customer loyalty remains strong. Of current iPhone users, 58% intend to buy another another for their next upgrade, a rate higher than its competitors Samsung, Huawei, and Xiaomi. Moreover, in China, the drop in interest in Apple (and a corresponding increase in preference for Huawei) throughout March and April, appears to have been transitory. In March, fewer than 40% of Chinese respondents said they would buy an iPhone for their next upgrade. This aligns with an 8% year-on-year drop in iPhone sales in China during Q2 -- the steepest drop since the beginning of the pandemic. But the survey shows that now, Chinese users wanting an iPhone for their next upgrade has rebounded to 60%. However, Apple's new Vision Pro -- a mixed-reality headset retailed at $3,500 -- has had a rocky start. Market tracker IDC has predicted Apple may not even make half a million sales this year. On Friday, just one person queued in the London store to be the first to access the device. However, the BofA survey found consumer sentiment towards the headset is rising. In March, less than 20% of respondents said they were interested in buying it, but by June, that number had risen to 35%.

Most iPhone users have old phones. But it's actually good news for Apple stock

Apple customers are famously loyal -- but it turns out they're also slow to upgrade. A just-released Bank of America survey of over a million iPhone users from the U.S., the U.K., India, and China found that most of them have old phones. Some 29% of users own an iPhone from the iPhone 13 family, which came out in September 2021, while 13% own an iPhone from the iPhone 12 family, which came out in October 2020, and 31% own an iPhone that's even older than that. Put differently, less than a quarter of iPhone users bought their devices within the past three years -- bad news for the company's flagship product. With iPhone demand falling over 10% in the first quarter of this year to a six-year low, tech experts and Wall Street analysts have criticized Apple for not giving users a reason to upgrade their old phones, and for lagging behind peers when it comes to new hardware and software offerings. iPhone sales are critical for Apple, accounting for more than 50% of the company's revenue in the second quarter. But Bank of America analysts say that iPhone users' aging phones could signal opportunity for Apple stock. "We are raising our [price target] on Apple to $256 (from $230) 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," analysts led by Wamsi Mohan wrote in a Thursday note to clients. Apple shares currently trade around $232, implying a potential 12-month return of just over 10% for investors if BofA's price target proves prescient. This new bullish report from BofA comes after its analysts argued in May that Apple will slowly turn its iPhones into AI-enabled 'intelliphones' with more processing power and new applications, forcing customers to upgrade. The following month, Apple revealed a few key features at its annual Worldwide Developers Conference (WWDC) that they hope will convince customers to buy new phones, including a new-and-improved version of Siri that will use AI tech called Apple Intelligence. Perhaps in response to complaints about its lagging hardware development, Apple also announced it will release a slimmed-down version of its iPhone next year in June, and reports indicate a flip phone similar to those offered by Samsung may also be coming soon. Beyond the coming rollout of new AI software features and hardware upgrades, Wamsi and his team pointed to Apple's steady customer loyalty as key to their bullish outlook. The analysts' survey of Apple customers showed 58% of current iPhone users intend on buying another iPhone when they upgrade their current device, compared to just 53% for Samsung, 38% for Huawei, and 31% for Xiaomi. Wamsi and his team argued that there could be strong demand for upgrades among wearable tech users as well. When smartwatch owners were asked which device they plan to buy when they upgrade, the Apple Watch was far and away the most mentioned option. Some 66% of Indian smartwatch users who plan to upgrade say they will buy an Apple Watch, compared to 59% in China, 57% in the U.S., and 41% in the UK. Similarly, BofA's analysts found consumers are more willing to buy the Apple Vision Pro than previously expected, despite its hefty price tag. Some 14% of respondents in the U.S. reported that they are planning on buying the Apple Vision Pro, compared to 20% in China, 36% in India, and 8% in the U.K. BofA's analysts said they view these as high percentages, noting they're all well above the February survey figures.