Bank Of America: Apple Is Still An Innovator

Apple Inc. AAPL was granted 2,160 patents throughout 2018, suggesting the company's era of innovation is far from "dead," according to Bank of America Merrill Lynch. 

The Analyst

Wamsi Mohan maintained a Buy rating on Apple with an unchanged $230 price target.

The Thesis

Apple's thousands of patent wins show that Cupertino is dedicated to producing new products and services, Mohan said in a Friday note. (See his track record here.) 

Yet many of these clues are hidden within the thousands of patent applications, the analyst said. BofA's deep dive suggests investments across augmented reality, virtual reality, wearables, health and fitness, autonomous driving and a "trove" of other products applicable to all devices is underway, he said. 

Apple is expected to spend $13 billion on R&D in 2019, but investors shouldn't necessarily expect a new generational product to be released by the end of the year, Mohan said: Apple is targeting products that could be several years away from launch.

The company is likely spending billions to go both on the defense and offense, the analyst said.

On one hand, Apple is spending to protect its innovation lead, and on the other, it is looking to dominate new product categories with differentiated offerings, he said. 

Investors may be guilty of underestimating the size of new markets targeted by Apple, Mohan said.

Apple's wearables business is barely five years old, and as a standalone entity it would be a Fortune 200 company with $15 billion in sales, according to BofA.

The iPhone generated $155 billion in sales in calendar 2018, which "masks the success" of the relatively new product line, the sell-side firm said. 

Price Action

Apple shares were trading up slightly at $190.09 at the time of publication Friday. 

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Photo by Daniel Lu/Wikimedia.