Apple Gets Big Price Target Boost Ahead of Key Quarterly Earnings

Apple will post quarterly earnings and update on holiday iPhone demand after the close of trading Thursday. (Christopher Jue/Getty Images)

Key Points

• Bank of America projects Apple’s annual earnings could double over the next five years, driven by its artificial intelligence strategy.
• Analysts increased Apple’s price target by $50 to $270 per share, citing the company’s strong ecosystem and brand as competitive advantages.
• Apple’s share of global revenue is expected to rise from 53% to 65%, with product revenue growing by $132 billion, $62 billion from iPhone sales.

Apple could double its annual earnings over the next five years, according to a note from Bank of America published Wednesday, as the tech giant’s artificial intelligence strategy boosts both iPhone and services sales in key markets around the world.

Bank of America analysts, led by Wamsi Mohan, added $50 to their Apple price target, taking it to $270 a share.

Apple shares were up 0.5% to $270.40 in afternoon trading. The stock has gained more than 33% since early August and topped the $4 trillion mark for the first time on record earlier this week.

“Apple’s ecosystem, its brand and its large installed base remains a competitive advantage,” Mohan and his team wrote. They estimate Apple will have around 1.4 billion iPhones and an overall tally of 2.56 billion in total devices, by the end of this year.

“The hardware installed base is the platform on which Apple builds and grows its services business,” Mohan added. “With the advent of Apple Intelligence, we see replacement cycles shrinking; creating a stronger replacement dynamic.”

Over the longer term, Bank of America sees iPhone shipments, the tech giant’s “workhorse,” rising to 263 million by the end of the decade from around 239 million this year.

That is likely to keep Apple’s share of the smartphone market steady at around 19.5%, but new launches and services, tied to its Apple Intelligence strategy, will see it squeezing more cash from each handset.

Mohan and his team see Apple’s share of global revenue rising from 53% to 65% over the same time frame. Additional products, such as AI-powered smart glasses, rings, and AirPods will also enhance overall revenue gains.

“In these 5-years we model product revenue to grow by $132 billion (from $316 billion),” Mohan wrote. “We model 47% ($62 billion) of this growth in revenue coming from the iPhone which we expect to remain the highest driver of revenue and operating profit within Apple’s hardware portfolio.”

Higher margin revenue from things like Apple TV, the App Store, and Apple Pay, meanwhile, could take the overall tally from its higher-margin services division past $200 billion by the end of 2030. This year’s total is expected to be in the region of $112 billion.

Collectively, Bank of America sees the revenue gains in iPhone and services sales taking Apple’s overall operating profit to around $223 billion in 2030, a gain that would represent a compound annual growth rate of around 14%.

Looking more near-term, Mohan and his team see Apple earning $1.80 a share over the three months ending in September, compared to the FactSet consensus of $1.78. He also sees Apple guiding December quarter revenue growth “to high single digits” with a gross margin in the region of 46.5% to 47.5%.

Apple reports fiscal fourth-quarter results after the closing bell on Thursday.

Write to Martin Baccardax at martin.baccardax@barrons.com