Apple shares rise after Bernstein analyst takes bullish stance

An Apple logo is pictured in an Apple store in Paris, France, March 6, 2024. REUTERS

Shares in Apple Inc closed up 2.5% on Monday after a well-known analyst at Bernstein Societe Generale Group upgraded the stock to an "outperform" rating, pointing to the prospects for phone replacement phone sales with help from generative artificial intelligence updates.

Apple registered its biggest one-day percentage gain in more than two weeks after the upgrade, which marked the stock's first "buy" equivalent rating from Bernstein's Toni Sacconaghi since early 2018.

Sacconaghi upgraded the stock from "market perform" and wrote that Apple had been hurt by a weak iPhone 15 cycle as well as fears its China business is structurally impaired.

But the analyst argued that China weakness is "more cyclical than structural" and that its business there has "exhibited much higher volatility" than Apple's overall business.

And Sacconaghi wrote that "replacement cycle tailwinds and incremental generative AI features set up Apple well for a strong iPhone 16 cycle."

Looking to 2025, he is estimating that the company could report $416.9 billion in revenue and $7.40 earnings per share, which would beat consensus expectations for revenue of $412.1 billion and $7.13 EPS. He also said iPhone unit sales could grow 10% year-over-year to 248 million.

And while Sacconaghi said that expectations are low for Apple's fiscal second quarter results, due out on Thursday, he noted the stock is "entering its seasonally strong trading period" as it has outperformed in the three months before its iPhone launches in 15 of the last 17 years.

Sacconaghi kept his price target of $195, which compares with Apple's closing price of $173.50 on Monday and its session high of $176.03 on the day. The median price target for the stock is $200, according to LSEG data.

The analyst had kept a "market-perform" rating on Apple since he downgraded it from "outperform" in February 2018. He had started coverage with a "market-perform" rating in November 2006 before upgrading it to "outperform" in October 2008.

Apple shares were last down 9.9% year-to-date after rising 48% in 2023.