Investing.com -- According to Bank of America analysts, the iPhone 16 cycle marks a departure from past product cycles, driven by Apple’s emphasis on software evolution through its new Apple (NASDAQ:AAPL) Intelligence platform.
BofA reiterated its Buy rating on Apple with a $256 price target, noting that the integration of ChatGPT and other Apple Intelligence features in iOS 18.2 will make the iPhone 16 cycle more dynamic than previous iterations.
“In our opinion, contrary to every cycle where all the hardware/software functionality is more or less static through the course of the cycle, we view the cycle as more dynamic with more material software updates,” BofA wrote.
The report emphasizes that as visual intelligence and personalization tools become more refined, the value to users will grow over time, differentiating this cycle from others.
Despite mixed initial reactions to iPhone 16 demand, BofA expects momentum to improve with Apple Intelligence’s rollout starting in late October.
The analysts are optimistic about Apple’s performance in its December quarter, projecting better-than-expected guidance. They anticipate revenue growth across categories, supported by new AirPods, MacBooks, and iPads, which could further lift sales beyond current market expectations.
For the September quarter, BofA forecasts 52 million iPhone shipments and 80 million units in the December quarter, with average selling prices slightly higher year-over-year.
Additionally, services revenue is expected to grow by 14% for both quarters, providing further support to the company’s top line. BofA also highlights that gross margins could exceed expectations, projecting 45.5–46.5%, as Apple benefits from product mix and revenue leverage.
BofA acknowledges a one-time $10 billion tax payment that will impact September quarter earnings by $0.65 per share but sees minimal negative EPS revisions beyond that.
“Given the sensitivity to EPS for 1mn iPhones is roughly $0.01 in EPS, we would look past any noise of iPhones tracking better or worse in the short term,” the analysts concluded.