Bank of America has increased its price target on Apple Inc (NASDAQ:AAPL, ETR:APC), driven by confidence in a robust multi-year iPhone upgrade cycle.
Bank of America's analysts believe that two key factors will drive more customers to upgrade their iPhones in the coming years: an aging installed base (all the iPhones that have been sold and are actively being used by consumers) and promising generative AI features.
"Our installed base analysis suggests significant upside," noted Bank of America in a Thursday research report. Many current iPhone users are still using older models, which are likely less efficient and lack the latest features. As these devices age, users are more inclined to consider upgrading to newer models that offer better performance and updated capabilities.
The bank’s optimism is backed by a refreshed global smartphone survey covering key markets like the US, UK, China, and India, revealing a substantial number of iPhone users still holding onto older models.
"We see a strong refresh cycle over the next few years," analysts noted.
Post-WWDC, expectations for 2024 upgrades have surged among iPhone users, with many still using models from previous generations.
Meanwhile, the next generation of iPhones is expected to include advanced artificial intelligence features. These GenAI enhancements can significantly improve the user experience by offering smarter and more intuitive functionalities, making the new models more attractive to customers.
Bank of America reaffirmed its Buy rating on Apple and upped its price target to $258, highlighting the company's enduring brand loyalty.
Around 58% of current iPhone users intend to purchase another iPhone, analysts noted, surpassing loyalty rates for competitors like Samsung and Huawei.