When Bank of America analyst Wamsi Mohan raised Apple's price target to $260, it wasn't just another routine upgrade. The move came on the heels of a major Google antitrust ruling that could reshape one of Apple's most lucrative partnerships. Here's what you need to know: Bank of America Securities reiterated a Buy rating on Apple and set a price target of $260.00, reflecting increased confidence in the company's Services growth prospects. The ruling prevents Google from maintaining exclusive contracts for its services, but allows it to continue paying distributors for default placements—and maintains the status quo in Apple's relationship with Google without immediate material changes to their payment structure.
Why this Google ruling actually boosts Apple's prospects
The antitrust ruling against Google might sound like bad news for Apple at first glance, but Bank of America sees it differently. Here's the key insight: regulatory clarity, even when it involves restrictions, often provides more predictability for long-term business planning than ongoing uncertainty.
The ruling boosts confidence in Apple's Services revenue growth, which is projected to increase by 12% year-over-year in fiscal years 2026 and 2027. This growth projection isn't just wishful thinking—it's based on the newfound certainty that Google can continue making payments for default search placement. A significant portion of this revenue comes from licensing, with Google Traffic Acquisition Costs being a major contributor.
The price objective for Apple has been raised to $260, reflecting a higher valuation multiple based on increased confidence in the growth of Apple's Services segment. This represents Bank of America's bet that regulatory resolution removes a significant overhang that had been weighing on investor sentiment.
What's really at stake in the Apple-Google partnership
Let's break down the numbers that matter. Google reportedly pays Apple between $15 billion and $20 billion per year to ensure its search engine is the default on Apple devices. More specifically, reports indicate that in 2022, Google paid Apple approximately $20 billion to remain the default search engine on Safari.
To put this in investment context, this represents roughly 20% of Apple's total services revenue—making it one of the most profitable partnerships in tech history. The amount from Google is accounted for as part of Apple Services revenue (as Google TAC), which means any disruption would directly impact one of Apple's fastest-growing and highest-margin business segments.
This massive payment stream has become a cornerstone of Apple's services business, generating more annual revenue than many Fortune 500 companies' entire operations. For investors tracking Apple's services momentum, understanding the stability of this Google partnership is crucial for projecting future cash flows and justifying current valuation multiples.
The bull and bear cases analysts are weighing
Bank of America's Mohan sees both sides of the Apple story clearly, and the Google ruling amplifies both the opportunities and risks in Apple's current position.
On the challenging side, Mohan says there are many items that could be headwinds and increase the bear case for Apple stock, including regulatory, lagging in the artificial intelligence race and gross margins potentially peaking. The regulatory pressure extends beyond Google: U.S.-China trade tensions and protectionist policies are squeezing Apple in both its major markets.
The AI concern becomes particularly relevant in the context of search. If Apple falls further behind in AI capabilities, it could weaken its negotiating position with Google—or make the development of its own search alternative more challenging.
However, Mohan also sees a bull case for Apple due to the company's resilient earnings, vertical integration, expanding installed products base, and services growth. In the context of the Google ruling, Apple's ecosystem advantage becomes even more valuable—the regulatory clarity means Apple can continue monetizing its massive user base through the Google partnership while simultaneously developing alternatives.
Apple's secret weapon: building its own search alternative
Here's where things get really interesting. Apple is quietly building a ChatGPT-style answer engine to power Siri, Safari, and Spotlight. This development takes on new significance in light of the regulatory environment—Apple now has the luxury of time and continued Google payments while building a potential replacement.
Apple has been subtly building its own AI answer engine to rival Google Search. This isn't just about creating another search engine—it represents a fundamental shift toward controlling the entire information flow within Apple's ecosystem.
With its own answer engine, Apple would control question, response, and ad revenue in a closed loop. This could transform Apple's relationship with search from dependency to dominance. Apple could deliver direct answers, keep all data in-house, and capture revenue currently lining Google's pockets.
The financial opportunity is staggering. Instead of receiving $20 billion from Google, Apple could potentially generate multiples of that amount by controlling the entire search and advertising ecosystem across its devices. This would represent the ultimate expression of Apple's services strategy—turning its hardware dominance into recurring, high-margin revenue streams.
Where the smart money sees opportunity
Despite near-term headwinds, Bank of America remains bullish on Apple's long-term prospects, and the Google ruling resolution provides a clear catalyst for this confidence. Bank of America analyst Wamsi Mohan says, 'Despite near-term headwinds, we see significant long-term opportunity.'
The regulatory clarity creates an ideal entry point. Apple's current forward price-to-earnings (P/E) ratio of about 21 times marks a key inflection point, particularly when combined with reduced regulatory uncertainty around its services revenue.
The historical precedent is compelling. Apple's stock has delivered solid returns in the months following a forward P/E compression below 25x, as Bank of America analysis shows. The pattern shows average gains of 7% after three months, 8% after six months, 14% after nine months, and 17% after 12 months. After the March 2024 P/E compression, Apple shares surged 36% in 12 months. The October 2023 instance yielded a 34% return over the same period.
What makes this particularly attractive is the risk-reward asymmetry. Even when you factor in downside scenarios, worst-case three-month declines typically stayed in the 5% to 11% range—a relatively modest downside compared to the historical upside potential.
Bottom line: Bank of America's $260 price target isn't just optimism—it's based on a calculated bet that Apple's Services business will continue thriving with newfound regulatory clarity. The Google ruling removes a significant uncertainty that had been weighing on the stock, while Apple's parallel development of search alternatives positions the company for even greater long-term value creation. For investors willing to look beyond short-term volatility, this combination of regulatory resolution, attractive valuation, and strategic optionality makes Apple a compelling long-term play in the evolving AI and services landscape.
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