Apple Surges on BofA Upgrade, New App Store Fees

Apple (AAPL) soared on Wednesday following a rating upgrade from Bank of America (BofA) and the announcement of its new App Store commissions.

Shares in the US tech giant soared 3.26% to $188.63 apiece on January 18, followed by a 0.03% after-hours gain to $188.69. Furthermore, analysts expect another 0.24% lift to $189.14 on the coming trading day.

BofA upgraded Apple from ‘Neutral’ to ‘Buy” and raised its price target by 8.17% from $208.00 to $225.00. The bank said new artificial intelligence (AI) technologies embedded in the iPhone will drive a 23.00% growth across 2024.

BofA added that a strong upgrade cycle will be formed when owners of older iPhones are obligated to upgrade for more processing power. Older models cannot properly run the next generation of generative AI (GenAI) features and App Store offerings.

Less than 30.00% of iPhone owners currently use the iPhone 14 or a newer model. Hence, over 70.00% of consumers with Apple’s flagship mobile device might need to replace their phones to enjoy the latest AI functionalities.

The company’s supporters see the upcoming iPhone models having a GenAI-powered live voice translator. The feature can be a watershed moment in telecommunications, allowing phone calls between people speaking different languages.

Other potential features include advanced zoom capabilities, improved text and email editing tools, and an integrated large language model (LLM). Better hardware could also lead to new features in Apple’s existing AI photo and video applications.

The world’s most valuable company by market cap had its BofA rating downgraded from ‘Buy’ to ‘Neutral’ in September 2022.

Apple App Store’s New Commission Fees Criticized

Spotify (SPOT) and a group of Apple App Store developers have called for regulators to block the platform’s new 27.00% commission fees.

The charges apply to purchases and subscriptions made through outbound links on the online marketplace’s pages.

For example, a user visits Spotify’s website through a link in the music streamer’s App Store page. Apple will be entitled to any purchases or subscriptions the user makes until they close Spotify’s site.

That means the Cupertino-based tech giant will receive over a quarter of the revenue for only hosting a link. Analysts argued that app makers will likely pass most of the additional costs to consumers.

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