Bank of America upgrades Apple to buy, sees nearly 20% upside on 'game-changer' augmented reality plans

Published Tue, Dec 14 20216:07 AM EST

Bank of America on Tuesday upgraded shares of Apple, saying the company's plans to launch a headset for augmented reality and virtual reality could drive price action for the stock. "We view this technology as a game-changer as it will enable many new applications which will require high performance hardware and higher access speeds," BofA's Wamsi Mohan said in a note. "Anticipation of this new product launch, in our opinion, could induce institutional investors to increase positions." BofA raised its rating on the stock to buy from neutral. The firm had a neutral rating on the stock since August 2020. BofA also hiked its price target on the stock to $210 from $160, implying 19.5% upside from Monday's close. The firm is the latest on Wall Street to raise expectations for Apple. Morgan Stanley a week ago increased its price target on the stock and named it a top stock pick for 2022, while JPMorgan on Monday hiked its estimate on Apple's December 2022 share price . Apple is notoriously guarded about new product plans, but BofA believes Apple will introduce an AR/VR headset by the end of 2022 or early 2023. The AR/VR plans could result in a stronger iPhone upgrade cycle in fiscal year 2023 due to the need for higher connectivity like 5G to use AR/VR applications, according to the firm. "The launch of an AR/VR headset could lead to shortening of the iPhone replacement cycle, and lead to stronger iPhone sales in F23 than we had prior expected," Mohan said. Apple should "be able to charge a premium for its AR/VR headset," BofA said. Services revenue could also grow as consumers spend more on immersive AR/VR enabled apps, the firm noted. "The company is typically not the first to introduce new features or technology; however, it does take pains to launch a product that is refined and that users would want to buy," Mohan said. Shares of Apple are beating the market in 2021, up 32.44% this year compared with the S & P 500's 24% gain. —CNBC's Michael Bloom contributed reporting.

Silhouette of a mobile user seen next to a screen projection of the Apple logo in this picture illustration taken March 28, 2018.

Dado Ruvic | Reuters

Bank of America on Tuesday upgraded shares of Apple, saying the company's plans to launch a headset for augmented reality and virtual reality could drive price action for the stock.