William Gallagher
Despite a recent Apple stock price target cut bank Morgan Stanley is amongst Apple's biggest bulls — and it has proven that by nudging the company's price target up to $216.
Morgan Stanley was oddly bullish about Apple even as it dropped its price target from $220 to $210. Following Apple's Q2 2024 earnings report, the company has increased its price target to $216, and sounds as if it feels vindicated.
"Apple guided to an above-Street June Q, alleviated concerns about China iPhone [sales], reached an all-time Services rev & GM record, authorized its largest incremental buyback in history, & hinted at Gen AI announcements to come in weeks," said the company in a note to investors seen by AppleInsider. "It's hard not to be more bullish after that."
Morgan Stanley dismissed the falling iPhone sales figures, saying that the decline was much less than expected. It also noted that year over year, the iPhone actually grew in mainland China.
Describing some relief that Apple's guidance for the next quarter was better than had been feared, Morgan Stanley also claimed that Apple's declining share price seemed to be over. It further notes that this point in the year is typically when Apple outperforms market estimates anyway, and believes that it sees growth in low to mid teen figures in 2025.
The analysts do say that they believe more needs to be done by Apple in China. But it also criticized the third-party data that has erroneously been claiming calamitous drops in iPhone sales.
At the same time, Morgan Stanley believes that the iPhone is no longer the sole growth driver for Apple. Instead, its analysts point to the record Services gross margin of 74.6%, an all-time quarterly record.
Consequently, Morgan Stanley has increased its predictions for Apple Services growth. It says there's no sign of Apple's Services slowing down, and the mix of that plus devices has helped with the overall margin performance.
Morgan Stanley is now looking to the expected AI announcements at WWDC 2024 for a boost to iPhone sales.
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Christine McKee
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5 Comments
‘Analysts, analysts, analysts…’ (say that in Steve Balmer's monkey jumping style!)
To those of us that were paying attention in the old days of the ‘speed wars’… Intel allways spoke of ‘CPU speeds’ without paying attention to ‘user experience’… due, of course, to Windows.
Apple always put more attention at the user experience,
Here is happening something similar.
When analysts ‘see Apple in China’… they pay attention to ‘the number of unit sold.’
And, of course, Chinese cellphone manufacturers… sell more!
But Apple is the global leader in revenues!
And that's what should analysts look for!
But investors bought like crazy!
Analysts are excellent at predicting the recent past.
AAPL always bounces around. Back in Dec it hit the all time high (199) and has been up and down since then. If you believe that the company's financials are healthy then it will continue to grow.
I think we have to admit that the last few years trend has shown the iPhone revenue is slowly decreasing. It doesn't mean that Apple is doomed since the installed base is growing. People are holding onto their phones for longer because they are just too damn good. The Apple Watch is fully adopted and has hit a snag with O2 sensor. iPads has been neglected or just lost its value. Macs are doing well but the volume is lower than iPhones so does not move the needle significantly. Services are the main growth area which got back to the installed base being healthy. Apple does need the next new thing and maybe the Apple Vision will be that.
Exactly what re your investment goals?
Why do you buy APPL?
Apple is a mature company. Consequently, explosive growth is in the rear view mirror waving bye bye.