Morgan Stanley lowers Apple price target to $195 on Covid disruptions

Katy Huberty of Morgan Stanley has lowered her Apple price target to $195 from $210 because of tough economic conditions in the June quarter, but says Apple still remains a top pick for 2022.

In a note to investors seen by AppleInsider, Huberty points out that Apple's March quarter results were better than anticipated. However, her June quarter revenue forecast fell by 3% as a result of Covid-driven supply constraints.

The key, however, is that Apple's constraints are driven by supply and not demand. In fact, Huberty says that Apple's demand is notably stable.

While the March quarter was yet another "clean" fiscal period for Apple and the company's June quarter commentary was "notably more positive," Apple is still facing headwinds from foreign exchange, a sales ban in Russia, and a resurgence of Covid-19 in key Chinese manufacturing cities.

As such, Huberty has trimmed her quarterly revenue forecast for Q3 2022 to $81.1 billion, down from $83.3 billion.

Despite the impact from Covid lockdowns and a small slowdown in the European market because of the Russia sales ban, Huberty believes that the the underlying health of Apple's product and services ecosystem is "remarkably stable."

"While management struck a more cautious tone given the uncertainty of COVID lockdowns in China and continued supply shortages, underlying demand commentary was more constructive, and we believe that an easing of COVID restrictions in China could drive upside to our new June quarter forecast," Huberty writes. "In a market beset by numerous challenges, Apple remains a beacon of stability, and we continue to see Apple as our Top IT Hardware Pick for 2022."

The analyst's new price target of $195, down from $210, is based on an implied price-to-earnings multiple of 30.3x on a new 2023 earnings-per-share estimate of $6.43.

Huberty's comments, like those from JP Morgan, come after Apple's reporting of a financial record-breaking March quarter.

10 Comments

rob53 13 Years · 3314 comments

About 2 years ago

Record sales in a down market so of course AAPL drops. Too many people with agendas trying to make money off of nothing. It’s an embarrassment the world is controlled by the stock market.

neoncat 5 Years · 165 comments

rob53 said:

Record sales in a down market so of course AAPL drops. Too many people with agendas trying to make money off of nothing. It’s an embarrassment the world is controlled by the stock market.

The "agenda" is people who constantly want to ascribe a purpose to the stock market other than making money. Like that the market is there to celebrate your favorite brand. I use, appreciate, and prefer Apple products. However, I would short AAPL in a hot second if I felt like that move could make me money. Or any one of a number of other market related activities: Hold long, hold short, filter my mutual or ETF holdings based on how much (or how little) AAPL they hold, and so on. That's what stocks are for. They are for making money. Period. Never invest with your heart.

cg27 18 Years · 223 comments

If Apple ever considered buying Disney now might be the time as DIS keeps falling. Then again, it could backfire with certain folks perceiving it as Woke buying/rescuing Woke.

jdw 18 Years · 1457 comments

neoncat said:
Never invest with your heart.

Had I followed that extremely bad advice way back in 1999, I probably still would not have any AAPL shares today. I've never sold a single share of AAPL over the last 23 years, and having been in the stock market since the late 80's, I've never shorted a single stock either. Buy good and hold has been my own personal strategy that I have no regrets about.

Here's the better way to think about stock buying...

Never follow stock advice from somebody in the AppleInsider forums.
Be smart. Follow your heart.

jdw said:

neoncat said:
Never invest with your heart.

Had I followed that extremely bad advice way back in 1999, I probably still would not have any AAPL shares today. I've never sold a single share of AAPL over the last 23 years, and having been in the stock market since the late 80's, I've never shorted a single stock either. Buy good and hold has been my own personal strategy that I have no regrets about.

Here's the better way to think about stock buying...

Never follow stock advice from somebody in the AppleInsider forums.
Be smart. Follow your heart.

Go ahead and choose 10 companies because you love them but don't do any research into their fundamentals. Buy $100 in stock in each. Let's circle back in a year and see how you've done.

"Buy good and hold" is not bad advice at all. By "good," the assumption is you've done your homework. Buying AAPL in 1999 was a pure risk play. If it wasn't an outsized portion of your portfolio, there was nothing wrong with chasing risk. That you held it for so many years because you "liked" the company is not causal—it could just have easily turned out very badly. Risk is risk, whether you love the source of it or not.

My point was not that AAPL or any stock should be viewed only through a negative lens. The point is that we make decisions with our investments based on a knowledge, not feelings.