A Bank of America senior equities analyst is suddenly raising the price target of one trillion-dollar tech stock.
In a new interview on CNBC Television, Wamsi Mohan says that the outlook of Apple (AAPL) has dramatically improved after a federal district judge ruled in an antitrust case this week that Google can continue to make revenue-sharing payments to distribution partners.
Google pays Apple about $20 billion a year to make its search engine the default search option in its Safari browser and other services.
“The buy side here was already expecting about 50% probability of [the ruling] going the wrong way, and since it didn’t, we actually think that an earnings cut of 10% was avoided, and half of that was baked in. We think the stock should be up about 5% just based off of the fact that there was so much negative headwind that was baked into Apple’s valuation. That’s part of the reason why we raised our target price to $260.”
Mohan also believes Apple stands to generate massive revenue growth from new artificial intelligence (AI) products.
“The way we think about it is Apple is clearly going to be a winner. And why is that? The distribution of these is extremely, extremely important. It’s been proven in search. I think it’ll also prove itself in the GenAI (generative artificial intelligence) context. The payments might not be coming in the same way, though. The way we expect this to evolve is that Apple will strike a partnership to have these models ultimately run on Apple’s servers within Apple’s own data centers so that they are the keepers of users’ information…
It could be a licensing agreement that they do with some of these model providers… These can be apps, put simplistically, running on your iPhone at the moment, and Apple will be monetizing those through its services business as usual… There are multiple ways of monetization.”
Apple was trading for $239 at the close of the market on Thursday.
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