Apple Inc. Ecosystem Remains Strong, Bank Of America Says

Bank of America analyst Wamsi Mohan reinstated coverage of Apple Inc. AAPL with a Buy rating and a $120 price target. His price target was based on 15 times 2015 EPS estimates of $7.95. He went on to note several reasons for his Buy rating:

• Product cycle drives significant tailwinds:

An iPhone “super cycle” and multi-quarter gross margin expansion. Valuation is attractive at only 13x C15 EPS.

• Ecosystem remains strong;

"Apple pay can add to the recurring revs over time driving a higher multiple. A $165 billion war chest of cash can be used to enter new markets, return cash to shareholders."

• Stock has moved, but next leg higher:

"Despite the stock up 25% YTD vs. the S&P 500 Index up 6%, we expect the next leg up to be driven by positive earnings momentum."

• Near-term benefits outweigh the headwinds:

"Risks to our thesis include a decelerating smartphone and tablet market, over exposure to iPhone, and potential for Apple watch to remain a niche product."

Technically, shares of Apple remain range-bound between $98 and $103, making a pennant formation with lower highs and higher lows.