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Morgan Stanley has raised its Apple price target to $152 on expectations of a strong December quarter across its product and services portfolio.
In a note to investors seen by AppleInsider, analyst Katy Huberty says that recent checks indicated that 5G adoption, the switch to remote education and work, and sustained App Store engagement all drove Apple to a potential blockbuster of a December quarter.
"Our recent conversations suggest investors expect Apple to release solid, but not great, December quarter results," Huberty writes. "We disagree and believe that Apple is likely to report all-time record quarterly revenue and earnings."
The analyst expects Apple to report double digit year-over-year growth across all five of its revenue segments, with some risk skewed to the upside for the iPhone, Mac, and Services.
Huberty is forecasting Apple December quarter revenue of $108.2 billion, about 5% above Wall Street consensus. Her earnings-per-share estimate of $1.50 is 7% above consensus. She also notes that all of Morgan Stanley's individual segment estimates are above Wall Street expectations except Services.
That momentum is likely to continue into 2021, Huberty adds. Her 2021 revenue and EPS estimates are both 5% above Wall Street's forecast.
The bullish outlook is supported by a strong launch for the iPhone 12 lineup, which Huberty says has been Apple's most successful in the last five years.
Demand for the higher-tier iPhone 12 Pro and iPhone 12 Pro Max is also driving Apple's average selling price higher. Despite that, Huberty says that concerns about iPhone 12 and iPhone 12 mini weakness are "somewhat misguided," since these devices are more popular in international markets.
The analyst is forecasting 78 million iPhone shipments in the December quarter, up more than 6% year-over-year. She models an ASP of $825, up 8% year-over-year. She says that will drive December iPhone revenue of $63.9 billion, up 14% from 2019 and 7% ahead of expectations.
Apple's iPhone strength is also likely to continue into 2021, with Morgan Stanley forecasting 220 million iPhone shipments during the year. That's based on several factors, including the fact that March quarter builds appear to be trending above seasonal expectations.
One indicator of how well the iPhone does in 2021 will be Apple's performance in China, especially on the backs of Huawei's decline.
Huberty is expecting similar strength in the iPad, Mac and Wearables segments. She expects particularly strong results for the Mac because of the M1 launch.
On Services, Huberty points out that the App Store has outperformed forecasts for a third consecutive quarter, growing 31% year-over-year in the December quarter. Leaving the rest of Morgan Stanley's Services revenue unchanged, that could imply revenue of $14.84 billion in the December quarter.
Huberty has raised her AAPL price target to $152, up from $144. The sum-of-the-parts target is based on a 6x enterprise value-to-sales (EV/Sales) multiple on Apple's Product business and a 12.9x EV/Sales multiple on Services. That results in a target 7.3x 2021 EV/Sales multiple and about a target 34x enterprise value-to-free cash flow multiple.