(Bloomberg) -- Apple Inc. shares rose on Thursday, after Bank of America upgraded the iPhone maker to buy from neutral, a sign of confidence in the stock following a weak start to the year.

The stock gained 3.3%, its biggest one-day percentage gain since May. It remains down 2% this year, making it one of the weakest performers among the so-called Magnificent 7 megacaps that fueled market gains in 2023.

Artificial intelligence will be a driver for the company’s hardware and services business, according to BofA analyst Wamsi Mohan, who wrote that he sees a “stronger multi-year iPhone upgrade cycle driven by need for the latest hardware to enable Generative AI features to be introduced in 2024/2025.”

Mohan also thinks the upcoming launch of Apple’s virtual reality headset has potential, writing that revenue for the product “could surpass iPad revs over time as spatial computing takes hold offering differentiated use cases driving services upside.” It lifted its price target to $225 from $208.

Even with Bank of America’s upgrade, Wall Street’s relatively cautious stance toward the company stands in contrast to other megacaps. Just 62% of analysts covering Apple recommend buying the stock, compared with ratios above 85% for Microsoft, Amazon.com Inc. Alphabet Inc., Nvidia Corp., and Meta Platforms Inc.

The stock has received at least three downgrades in 2024, with Redburn Atlantic citing valuation concerns and both Piper Sandler and Barclays seeing risks to iPhone sales. 

The weakness to start the year has pushed Apple below Microsoft in valuation. Currently, Apple has a market capitalization of $2.92 trillion, just shy of the software giant’s $2.93 trillion.

(Updates to market close.)

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