Apple is the top hardware stock buy for 2023, says Morgan Stanley

Despite what remains an incredibly challenging environment for computer hardware manufacturers, Morgan Stanley thinks Apple stock is the best buy for 2023 because of an exciting year ahead for the company.

In a new analysis of what proportion of Big Tech firms is owned by pension funds and other institutions, Morgan Stanley concludes that Apple is seeing "underownership," and suggests 2023 is the time to invest.

This institutional ownership of Apple has also declined. "Apple's active institutional portfolio weighting in 4Q decreased by 58 bps Q/Q to 5.10%," say the analysts in a report seen by AppleInsider, "the lowest level in over 1 year."

Morgan Stanley does say that it acknowledges that "Apple is not fully immune from deteriorating consumer electronics demand," its analysts "see 5 idiosyncratic tailwinds over the next 6-9 months that make Apple our top pick for 2023."

Four of those five tailwinds are to do with specific issues Apple is expected to see or make in 2023:

Services "re-accelerating" growth
"Pent up demand" for the iPhone 15
An Apple AR headset
Possible hardware subscription service

Morgan Stanley's fifth point is what it describes as "underappreciated gross margin tailwinds."

"In our view, [hardware subscription] has the potential to not only accelerate installed base monetization," say the analysts, "but also unlock over $1T of market cap upside as the market properly values the increased visibility and stability of a subscription model."

In all, Morgan Stanley examined the institutional ownership of more than a dozen Big Tech firms, including Apple, Microsoft, Amazon, Nvidia, and IBM.

"As of 4Q22, many large cap technology stocks remained under-owned relative to their weighting in the S&P 500, with MSFT, AAPL, AMZN, NVDA and IBM the most under-owned of the stocks we track," it said. "However, out of these 5 stocks, only MSFT and IBM saw their under-ownership gap widen in 4Q22, while the rest (AAPL, AMZN and NVDA) saw this gap narrow in 4Q22."

So it appears that financial institutions are already starting to increase their investment in Apple ahead of 2023's potential launches.

Apple has not announced either an AR headset, or any hardware subscription service. However, multiple reports predict at least an iPhone subscription potentially starting as soon as March 2023.

The Apple Mixed Reality headset is now expected to be launched at WWDC 2023 in June.

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5 Comments

twolf2919 2 Years · 149 comments

About 1 year ago

I agree with most of what Morgan Stanley is saying - but they obviously don't know their AR from their VR. There is 0% probability Apple will be coming out with an AR product this year. Most likely, it'll announce a VR headset this year, but given the niche market that is VR and the rumored price point of > $1.5k, the release of such a VR headset will not result in any meaningful revenue for AAPL in 2023.

JP234 said:

twolf2919 said:

I agree with most of what Morgan Stanley is saying - but they obviously don't know their AR from their VR. There is 0% probability Apple will be coming out with an AR product this year. Most likely, it'll announce a VR headset this year, but given the niche market that is VR and the rumored price point of > $1.5k, the release of such a VR headset will not result in any meaningful revenue for AAPL in 2023.

You think that tech industry analysts at Morgan Stanley, with resources you can't even imagine, don't know these things and you do?
That's hubris.

No hubris - just a lot of experience, including a stint at Morgan Stanley in the '90s.. Analysts guessing what a company like Apple will bring to market has very little to do with the financial resources at their disposal - I doubt a Morgan Stanley analyst has any more access to Apple product secrets than anybody else. If they did, Apple as a publicly traded company could actually get into trouble. They read news, rumors, and attend Apple quarterly earnings calls - just like you and me could (and I do). All the rumors so far, including from fairly accurate rumor sources such as Mark Gurman and Kuo Ming Chi, have suggested that a MR/VR headset in the $2k range is forthcoming, possibly as early as Apple's developers conference in June.

JP234 said:

twolf2919 said:

JP234 said:

twolf2919 said:

I agree with most of what Morgan Stanley is saying - but they obviously don't know their AR from their VR. There is 0% probability Apple will be coming out with an AR product this year. Most likely, it'll announce a VR headset this year, but given the niche market that is VR and the rumored price point of > $1.5k, the release of such a VR headset will not result in any meaningful revenue for AAPL in 2023.

You think that tech industry analysts at Morgan Stanley, with resources you can't even imagine, don't know these things and you do?
That's hubris.

No hubris - just a lot of experience, including a stint at Morgan Stanley in the '90s.. Analysts guessing what a company like Apple will bring to market has very little to do with the financial resources at their disposal - I doubt a Morgan Stanley analyst has any more access to Apple product secrets than anybody else. If they did, Apple as a publicly traded company could actually get into trouble. They read news, rumors, and attend Apple quarterly earnings calls - just like you and me could (and I do). All the rumors so far, including from fairly accurate rumor sources such as Mark Gurman and Kuo Ming Chi, have suggested that a MR/VR headset in the $2k range is forthcoming, possibly as early as Apple's developers conference in June.

"I doubt a Morgan Stanley analyst has any more access to Apple product secrets than anybody else."
If you had worked at the trading desk of M-S, you would know different. My guess is that even if you did work for the company, your role was not in that division.

You can doubt all you want. It is true that I was not a trader - my role at the time was to get Morgan Stanley started with its first web-based tools and products - i.e. I was a software developer. But in that role I actually wrote some of the tools the traders subsequently used. Traders have a heck of a lot more financial tools/information at their disposal than normal folks, but they don't magically have access to more company/tech news than you and I.

But this discussion is going nowhere. Thanks for your insightful contribution to this thread.

danox 11 Years · 3443 comments

JP234 said:

twolf2919 said:

I agree with most of what Morgan Stanley is saying - but they obviously don't know their AR from their VR. There is 0% probability Apple will be coming out with an AR product this year. Most likely, it'll announce a VR headset this year, but given the niche market that is VR and the rumored price point of > $1.5k, the release of such a VR headset will not result in any meaningful revenue for AAPL in 2023.

You think that tech industry analysts at Morgan Stanley, with resources you can't even imagine, don't know these things and you do?
That's hubris.

If you are a long-term investor/reader of Appleinsider, Ars Technica, The Verge or Tidbits, you certainly know about Apple better than most of the analysts on Seeking Alpha, Bloomberg, or the Wall Street Journal most have had no clue about Apple over the years, and if you were dumb enough to listen to them about Apple and make investment decisions about Apple well…. you would have missed the boat (long Apple thru 2,7, and 4 to 1 splits). Hubris yes indeed…..

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