Investors are again weighing down Apple’s gross profit margins, according to Bank of America. “In our opinion, the Street again underestimates the long-term gross margin potential for Apple for both products and services, where we expect product gross margins to rise by around 180bps and services margins by around 150bps over the next few years. See above, analyst Vamsi Mohan wrote in a note Thursday, citing fundamental points, or 1/100ths of a percentage point. AAPL YTD shares have climbed earlier this year with Apple. Mohan noted that In 2018, Wall Street modeled gross margins at 39% for 2023. In fact, the company exceeded those expectations, reporting a 44% gross margin last year. Bank of America estimates that iPhone and iPad makers It comes amid a rough patch for Apple. Shares of Apple have fallen 13 percent this year as it struggles to articulate its vision for cheap iPhone sales and incorporating artificial intelligence into its products and services. Looking ahead, Mohan estimates that vertical integration and product mix could add more than 100 basis points to Apple’s gross margins. It also estimates that using Apple’s own internal modem could add 110 basis points to product gross margins and 160 basis points to iPhone gross margins. Meanwhile, Apple can cut costs by making its own data center chips and using its own silicon in data centers, adding 100 basis points to gross margins for services in the process. “A growing mix of services (high-margin business) as a proportion of the company’s total revenue could improve gross margins by 60bps,” Mohan wrote. “Pricing is an additional layer that Apple can use to further increase gross margins.” JPMorgan also sees Apple as undervalued by investors, but sentiment is showing some signs of improvement. Analyst Smek Chatterjee said this is partly due to the company’s valuation premium sitting at the lower end of its range since the launch of the 5G phone. He added that the rise of artificial intelligence and its role in the next iPhone upgrade cycle is also driving investor interest. “Contrary to deterioration in fundamentals regarding hardware demand as well as services growth outlook, interest in AAPL’s shares has improved from a broad group of investors who would otherwise have been the lowest. Yet premium valuations have been against multiples. Growth outlook compared to other mega-cap tech stocks,” he wrote.