'Pretty negative sentiment': why BofA advises buying Apple against the risks

Apple was under pressure before the release of the quarterly report on July 31: investors are concerned about duties, antitrust risks and weak progress in the field of artificial intelligence, said analysts at BofA. Nevertheless, despite all the risks, analysts of the investment bank still advise investors to buy the company's shares and expect them to grow by another 10%. What growth drivers do they see?

BofA believes Apple is in a vulnerable position ahead of its fiscal third-quarter report (expected July 31), with investors concerned about possible margin erosion due to trade duties and continued regulatory pressure. This is reported Investing.com.

"We are capturing a fairly negative sentiment among clients amid uncertainty around the impact of duties, investigation by the U.S. Department of Justice (related to Google payments), problems with the App Store and slow progress in AI," BofA analysts said in a note. They said market participants will focus on gross margin, which Apple itself projected at 46% (including $900 million in additional costs due to duties). BofA's forecast for Apple's revenue and earnings per share are $90.2 billion and $1.45, respectively - just above the consensus of Wall Street analysts.

Nevertheless, BofA maintained a Buy rating for Apple stock with a $235 target price - up 10% from its last close (Friday, July 25). The bank maintains a positive view on the company's upcoming product updates, recalling that iPhone form factor changes in the past have encouraged more frequent device upgrades by users.

The current quarter ending in September will be the "bottom" in margins for Apple, from which to build on, according to analysts at BofA. They expect that Apple will be able to further increase its iPhone, Mac and iPad sales thanks to new models - including a thinner iPhone and the new iPad Pro tablet, which is expected to be released in the fall. Against this backdrop, BofA expects Apple's results for the current quarter to be at least within expectations, and revenue may even slightly beat Wall Street forecasts.  

Apple is "facing a mountain of challenges," agreed Monness Crespi Hardt analyst Brian White, who was quoted by Investor's Business Daily. "Among them are duties, AI failures, economic woes in China, increased focus on the App Store, and potential damage from the DOJ's decision (expected by the end of August) in the civil antitrust case against Google. Plus, Apple itself is involved in the DOJ antitrust case," White noted. Nevertheless, the analyst maintained a "buy" rating and a $245 target price for the company's stock - up nearly 15% from Friday's close.

Morgan Stanley analyst Eric Woodring believes that Apple's securities will remain in the $195-215 range until there is clarity on key issues, from service growth and duties to the outcome of the Justice Department's antitrust case against Google. However, he too maintains an Overweight recommendation, equivalent to a buy advice, and a $235 target.

On average, analysts polled by FactSet forecast that Apple will report earnings of $1.42 per share on revenue of $89.1 billion for the past quarter - implying year-over-year growth of 1.4% and 3.9%, respectively, notes Investor's Business Daily. For the current quarter, Wall Street's forecast calls for earnings of $1.65 per share - just a cent more than a year ago - and revenue growth of 2.9% to $97.67 billion.

In trading on Monday, Apple's share price dropped by about 0.3% in the moment. Compared to early 2025, the company's securities have fallen in price by 14.5%. After Tesla, it's one of the worst performers among the "Magnificent Seven" players.

Nevertheless, 65% of analysts who gave ratings to Apple's securities still advise investors to buy them (Buy and Overweight ratings). Another 30% take a neutral stance with a Hold rating, while the remainder suggest selling. Wall Street's consensus target price of $229.4 suggests the company's market value is up another 7% from Friday's close.

This article was AI-translated and verified by a human editor