(Reuters) -Shares in Apple Inc were up 2.6% 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 was on track for its biggest one-day gain in roughly two weeks after the upgrade, which was the stock’s first “buy” rating since early 2018.
Bernstein’s Toni Sacconaghi upgraded the stock from “market perform” and wrote on Monday that Apple had been hurt by a weak iPhone 15 cycle as well as fears that 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 last trading price of $173.76 on Monday.
Its session high so far was $176.03.
The analyst had had 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 9.7% year-to-date after rising 48% in 2023.
