Apple may be set to outperform, BofA says

There were reasons to be cautious on the outlook for Apple in August, but they had now been discounted by the markets, analysts at Bank of America-Merrill Lynch said, pointing out several potential positive catalysts which were looming on the horizon.

Critically, recent negative estimate revisions - driven by worries about a lacklustre iPhone 6s cycle and some data points from the company's supply chain - had now been priced in.

Against that backdrop, investors ought to be mindful of the potential positives out there, such as: the upcoming launch of the new Apple Watch, the introduction of the iPhone 6c, a looming capital return update and the iPhone 7 launch in 2016.

However, the key reasons for their rosier view were the results of their latest China Apple survey and the current so-called 'positioning' of long-only funds.

The former had revealed that demand for iPhones remained strong in the world's most populous country, with about 50% of iPhone users planning on upgrading to a new phone over the next year, for example.

As for long-only fund managers, most were now underweight, so a rotation back into the stock might be on the cards, they said - given the recent pullback in the shares, analysts Wansl Mohan, Ruplu Battacharya and Param Singh said in a research note sent to clients.

That was particularly true as a result of the outperformance by othe large-cap tech companies in 2015, they said.

With multiple levers to drive upside in the shares the broker decided to move to a 'buy' on the stock and set a target price of $130.