Investment Bank Morgan Stanley is reiterating its forecast of strong, continued iPhone growth in 2022, citing the iPhone 13's delivery of features consumers care most about.
In a note to investors seen by AppleInsider, Morgan Stanley lead analyst Katy Huberty says that the Sept. 14 Apple event was largely in-line with her expectations. However, the addition of larger iPhones storage variants and affordability increases her confidence in robust iPhone growth through 2022.
On affordability, Huberty notes that iPhone prices are relatively unchanged from the iPhone 12 lineup, despite the fact that Apple also bumped the storage on some models. The introduction of higher-end variants, like the 1TB models, are likely to drive year-over-year iPhone average selling price (ASP).
"When combined with iPhone replacement cycles that remain elongated, 5% 5G adoption within the iPhone installed base, fully reopened retail stores, and elevated iPhone backlog entering FY22, we remain bullish on the prospects for iPhone growth in FY22, with the potential for upside vs. our current iPhone ASP forecast," Huberty writes.
The analyst notes that the iPhone 13 lineup didn't introduce any unprecedented features, but it did deliver on some of the features that consumers care most about: 5G, better cameras, and improved battery life.
The iPhone 13 supports 5G with more bands and in more places than the iPhone 12. It also features upgraded cameras across the board. Lastly, all four iPhone 13 models pack better battery life than their predecessors. The iPhone 13 Pro Max, for example, now features up to 28 hours of video playback — the longest ever for an Apple handset.
Additionally, while iPhone ASPs have increased year-over-year, Huberty notes that aggressive iPhone trade-in programs and carrier promotions could improve the lineup's affordability.
"For example, the net effective monthly installment payment (over 24 months) for an iPhone 13 model this year, after taking into account the average iPhone trade-in value, is anywhere from 8% to 26% lower than the comparable iPhone 12 model a year ago," Huberty notes. "Additionally, both AT&T and Verizon came out with iPhone 13 promotions that are more aggressive than their iPhone 12 promotions from last year."
Huberty reiterates her Overweight rating and 12-month Apple price target of $168. The target is based on a sum-of-the-parts valuation, which breaks down to a 5.8x enterprise value-to-sales (EV/Sales) multiple on Apple's product business and an 11.6x EV/Sales multiple on Apple's Services business. It results in an implied 7x target EV/Sales multiple for 2022 and a 30x target price-to-earnings multiple.