Morgan Stanley said Friday it is reducing expectations for Apple through fiscal 2021 to better align with the bank's macro view that GDP growth will take a greater hit than previously expected, due largely to a prolonged consumer recovery.
While the coronavirus is still having a big impact on China iPhone production, and the smartphone market as a whole, Morgan Stanley sees the impacts as mostly timing problems for Apple, and are buyers, maintaining a $368 stock price target.
Morgan Stanley has raised its price target on shares of Apple, voicing its view that investors are under-appreciating the impact this year's 5G-enabled iPhone release is expected to have on the company's bottom line, especially given the roll-out is expected to coincide with a multi-year peak in the number of iPhones due for replacement.
China, the world's largest smartphone market, has been nothing short of a moving target for Apple. A salvo of shots fired by top analysts this week only evidences one thing: the only near-term certainty with Apple and China may be more uncertainty.
Optimism surrounding Apple's upcoming 5G iPhone cycle and revenue growth within the company's Services sector helped drive one of the largest sequential increases in institutional ownership of AAPL shares in more than half a decade.
Apple is set to have a bullish 2020, Morgan Stanley claims the day after the launch of the 2019 iPhone models, with the aggressive pricing of Apple Arcade and Apple TV+ forming part of Apple's strategy to accelerate its Services revenue growth into next year.
Apple will take multiple steps to mitigate the incoming 10% tariff on Chinese imports to the United States, Morgan Stanley believes, with the iPhone producer using non-Chinese assembly and supply lines for US-bound smartphones as a workaround that has been 16 months in the making.
Apple is an attractive company to invest in ahead of its upcoming earnings report, Morgan Stanley suggests, with low Wall Street estimates for September and negative investor sentiment for the iPhone maker's current state potentially making decent results for the next quarter seem better.
The fallout from the U.S. Supreme Court's decision to allow an antitrust lawsuit against Apple over an alleged monopoly on iOS apps via the App Store won't immediately affect the company, suggests Morgan Stanley, but the legal threat could affect the stock value for years.
Qualcomm's share price still has some space for growth following the surprise settlement with Apple, Morgan Stanley suggests, with the price potentially able to grow by another 15% due to both supplying Apple with modems and being a central figure in the creation of 5G networks.
Apple's fortunes in China are slowly turning around, suggests Morgan Stanley, with a continuation of share growth for the iPhone user base in March taken as an indicator of better than expected results heading into Apple's upcoming quarterly financial results.
The App Store is continuing to be a stable source of Services revenue for Apple, Morgan Stanley analysts claim, with revenue from the digital storefront up 15 percent year-on-year on the back of Chinese gaming revenue, but entertainment-related apps are apparently worth monitoring for a potential downturn.