Neil Hughes
Morgan Stanley joins a number of other investment firms that have raised their price targets on shares of Apple stock this week, reflecting significant gains posted by the company heading into the holiday shopping season and in anticipation of next year's debut of the Apple Watch.
Analyst Katy Huberty said in a note to investors this week that she sees shares of Apple reaching $126, up from her previous target of $115. Apple blew past the $115 price point in trading on Thursday, following upgrades on its stock from Morgan Stanley, as well as Evercore and Piper Jaffray.
And while Huberty's new target is set at $126, her range for AAPL stock extends to $150 in Morgan Stanley's "bull case" projection. The analyst said in her note, a copy of which was provided to AppleInsider, that she believes investors are underestimating demand for the upcoming Apple Watch, set to launch in early 2015.
Like the iPhone and iPad before it, the Apple Watch will achieve strong sales right out of the gate, Huberty believes. Her estimates call for 10 percent of the compatible iPhone user base to buy an Apple Watch, which would translate to 30 million units sold in calendar year 2015.
For example, before the first iPhone launched in June 2007, Huberty said Wall Street generally expected Apple to ship 9 million units in fiscal year 2008. In reality, Apple exceeded that number and shipped 12 million units.
And with the iPad, estimates pegged calendar year 2010 shipments at 5 million units, but Apple actually shipped 15 million iPads in the tablet's first year.
Huberty's 30 million unit estimate for the Apple Watch is on the high end of market expectations, but she still believes her number is a conservative guess. That's because Huberty expects that the wearable devices market will be the fastest ramping consumer device category to date, growing even faster than modern smartphones and tablets did after they debuted.
@thisisneil $AAPL PT percent increases (courtesy SIRI)
RBC 4.35%
UBS 8.7%
MS 9.57%
PJ 12.5%
EVC 8%
BTIG 5.47%
average 8%
— Jim Neal (@jameswneal) November 20, 2014With Huberty's revised price target of $126, a total of four investment firms tracked by AppleInsider have increased their estimates this week alone. Piper Jaffray and Evercore have both set new targets of $135, while RBC Capital Markets raised its target to $120 on Monday.
UBS also upped its target earlier this month to $125. Analysts have been revising their estimates in the wake of recent gains by the company, which has been setting new all-time highs for its stock price following the results of a blockbuster September quarter.
Some, however, have yet to revise their targets, most notably Manyard Um of Wells Fargo Securities. Um has rated AAPL as "market perform," and currently holds a valuation range for the stock at between $92 and $102, even though Apple has not traded in that price range for over a month.
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which would translate to 30 million units sold in calendar year 23015.
I sure hope they sell more units than that before we get to that year.
Watch is going to do well. Nice to see an analyst acknowledging this.
thing is you don't need to watch to make this argument, iPhone 6 numbers are going to be so crazy strong that they will be the instrument of stock price change.
Says investors underestimate Apple Watch... raises target $11 above current price.
... $9 under two other investment houses.
It's so hard to predict the success of a new product category like this. But I think this prediction makes a lot of sense, with one caveat.
When the iPhone came out I didn't buy one until the 3G became available. I just didn't think the initial iPhone was fully baked.
When the iPad first came out I pre-ordered it. It was the first time I bought a new product category without being able to see it first hand. But to me that was easy to do -- I saw it as just a big iPod Touch, which seemed quite appealing at the time.
I think the key for me buying Apple Watch v 1.0 is if the S1 is upgradable. If it is, I'll very likely buy v 1.0, but I won't pre-order (I'll want to pick style/band in person). If the S1 can't be upgraded then it's not likely at all that I'll get v 1.0 unless battery life and performance are really, really good.
So I think the big caveat on whether the Watch does as well as she's projecting is the upgradability. Nobody is going to buy a watch -- particularly a several thousand dollar gold watch -- that is obsolete in a year or two. People have a different expectation for this class of device. I suspect Apple knows this, and certainly the form of the S1 screams upgradable. But I'll want confirmation that it's upgradable -- or that an upgrade isn't necessary because they've hit it out of the park with v 1.0 -- before I buy, and I suspect many others will be in the same boat.
It's so hard to predict the success of a new product category like this.
This is not really a new product category. It is for Apple, but it's not quite the same as with mobile phones. The market is already saturated with smart-watches, and they aren't really catching on. So far, aside from fit and finish I haven't really seen Apple offering anything that the others aren't -- at least in terms of what the marketplace seems to be demanding. They're offering ?Pay, and that's about it (and that requires a current iPhone). I'm not even sure if the ?Watch is waterproof at this point. There's definitely going to be a small pool of early adopters who buy anything Apple offers, but unlike the iPhone, and the iPad, there just doesn't seem to be horde of consumers clamoring for something better in this category, at least not to pay a premium for it.
I've no doubt that eventually as the ?Watch matures, and developers find indispensable ways to integrate it into our lives it might morph into another powerhouse product for Apple. But at the moment, they're really just one more entry into a crowded field for a product general consumers don't really seem to be demanding. The Rolex-wearing guy isn't going to toss it for an ?Watch. He might buy one as an option, but he's got the disposable income to do it. Most people have to seriously consider purchases like this, and I just don't see them opting for something their phones already largely do -- phones which are required to use the ?Watch. So, no this won't be the iPhone launch, I'm not even sure it will do as well as the iPad launch. Maybe something akin to the Apple TV launch.