Why Apple Is Testing Record Highs: Analyst

Apple's multiple typically expands heading into a product cycle, notes Bank of America's Wamsi Mohan.
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Apple shares hit an all-time high this week, and several trends could soon push the stock even higher, wrote a Bank of America analyst. 

Writing in a note on Thursday, BofA's Wamsi Mohan broke down several drivers that should lead shares higher, reiterating the bank's Buy rating on Apple shares based on "continued penetration into installed base, large net cash and continued strong capital returns." Mohan raised his price target on Apple shares to $390 from $340.

Apple  (AAPL) - Get Report shares fell 2.7% to $343.43 on Thursday on a day when the overall market fell sharply on a poor outlook for the economy.

Mohan noted that Apple's multiple typically expands heading into a product cycle, which helps to explain Apple's record high this week. Other factors driving the stock include a forthcoming strong sales cycle for iPhone and wearables, the stability of Apple's cash flows and improving gross margins from Apple's "continued insourcing and services mix." Those factors will drive a higher multiple in calendar year 2021, Mohan wrote. 

Apple is close to using its own chips in Mac computers instead of Intel  (INTC) - Get Report chips, Bloomberg reported this week. 

Apple may announce the move at its first virtual WWDC, which kicks off June 22. Apple is expected to preview iOS14 and a slew of other software enhancements. Apple sometimes announces hardware at WWDC, as well. 

The company may also launch a discounted services bundle as well, according to a beta version of iOS 13.5.5 released last week. 

Then in the fall, Apple is due to unveil its iPhone 12 lineup, including a much-anticipated 5G phone. 

Apple shares have risen 15% year to date. 

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