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Morgan Stanley bumps Apple price target to $210 on record-breaking Q1 2022

Apple iPhone 13 models

Investment bank Morgan Stanley has raised its Apple price target to $210 after the iPhone maker reported Q1 2022 earnings that broke records and beat Wall Street's predictions.

In a note to investors seen by AppleInsider, Morgan Stanley analyst Katy Huberty writes that Apple's December quarter "was one of the cleanest quarters in recent memory" with beats across revenue, gross margins, and earnings-per-share.

According to Huberty, the blockbuster earnings results will likely "refocus investors" on the stability and longevity of Apple's growing user base. That's in addition to the company's growing pipeline of new products and service, which suggest that Apple has ample room to grow.

"When coupled with a stronger than anticipated March quarter guide despite difficult Y/Y comps and continued (but easing) supply constraints," Huberty writes "[The] results illustrate the strength and stability of Apple's product and services ecosystem, a clear differentiator in a more difficult market environment."

Although Apple did not provide specific revenue guidance, its forecast of strong year-over-year growth could debunk concerns of slowing demand. As a result of Apple's March quarter guidance, Huberty now predicts that the company will see 2022 revenue growth of 8% year-over-year.

Huberty also has greater confidence in structurally higher gross margins. While logistics and component costs could weigh on margins in the near-term, she still predicts that gross margins at a company level are now at 43.1% in 2022, up from 42.1% previously.

The growth in user base can also help remind investors about the value of Apple's ecosystem, including lifetime user value, Huberty added.

After earnings, Huberty has raised her 2022 and 2023 revenue by 4.5% and 4%, respectively. Apple remains a top pick for Morgan Stanley in 2022.

The analyst's new 12-month Apple price target of $210, up from $200, is based on a 6x enterprise value-to-sales multiple (EV/Sales) on Apple's product business and a 10.6x EV/Sales multiple on Services. That implies a 33.2x target price-to earnings multiple.