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Bank of America sees a favorable risk-reward setup for Apple (NASDAQ:AAPL) when its price-to-earnings ratio slips below 25, especially within a three to six-month horizon.
Analyst Wamsi Mohan, in a recent client note, noted Apple shares have fallen sharply down 25% year to date and 23.5% since its last earnings, compared with declines of 13.7% and 16.6% for the S&P 500 over the same periods.
He attributed part of the drop to concerns over tariffs and the delay in launching a more tailored Siri voice assistant. Despite the challenges, Mohan maintained a Buy rating and a $250 price target, calling the dip an attractive entry point into a fundamentally strong stock.
He pointed out that historically, after Apple's valuation falls below the 25x earnings mark, the stock has posted gains of 7%, 8%, 14%, and 17% over the subsequent three, six, nine, and 12-month periods. While prior downside ranged from 5% to 11% in similar environments, upside potential stretched between 11% and 26%.
Although geopolitical tensions and trade risks with China could weigh on earnings estimates, Mohan believes Apple can offset this pressure through strategies like expanding Indian production, product pricing adjustments, supply chain cost controls, and launching premium devices.
Moreover, as of 11:36:39 AM ET, Apple (NASDAQ:AAPL) is trading at $184.44, up $2.98 (+1.64%) from its previous close. This snapshot reflects real-time data during regular trading hours, indicating a positive gain for the session.
This article first appeared on GuruFocus.