Morgan Stanley bumps Apple stock price target to $720

Posted:
in AAPL Investors edited January 2014


With shares of Apple on a chart-topping climb, investment bank Morgan Stanley has lifted its price target for the stock to $720, with a 12-month bull case estimate of $960.



Apple's stock reached new heights on Tuesday, up 2.92 percent at market close. Shares of the company have been on a rally since the beginning of the year and have climbed 40 percent to $568.10.



Analyst Katy Huberty sent a note to investors Tuesday informing them that Apple had been added to the firm's Best Ideas list. The analyst continues to believe that investors "underestimate" Apple's strong position, raising her price target from $515 to $720. She also said the stock could climb as high as $960 by next March in a bull case scenario.



Morgan Stanley's new target is one of the highest seen to date. The Street reported last week that FBN Securities had set a new Wall Street record with its AAPL price target of $730. The previous high was Barclay's Capital's $710 price target.



Enterprise tablet adoption combined with demand upside from a lower-priced iPad; a strong upgrade cycle for LTE-capable iPhone later this year and emerging market iPhone (plus iPad, Mac) growth driven by new carriers are all potential upside drivers in her mind. In addition, Huberty added that the world's largest carrier, China Mobile, "could add more incremental iPhone shipments" next calendar year than the Street currently expects.



According to a January 2012 CIO survey by Morgan Stanley, 56 percent of U.S. companies already purchase tablets for corporate use. Assuming Apple manages to maintain an 80 percent share of the enterprise tablet market, Huberty believes enterprise iPad purchases could reach 9 million units and $5 billion in revenue for Apple next calendar year.











Meanwhile, consumer demand is also expected to remain robust. A survey from late last year showed that 13 percent of U.S. consumers expect to buy an iPad in the next 12 months. Huberty pointed out that the data indicates as many as 80 million unit sales globally next year. The analyst also suggested that the $100 price cut on the iPad 2 could bring about more than 15 million U.S. iPad sales and over 35 million global sales.



The analyst said Apple's next-generation iPhone is likely to include a "higher-resolution and potentially thinner screen, new casing material, faster processor, and quad-mode baseband chip that works on multiple flavors of 3G and LTE." Based on a recent survey indicating 62 percent of iPhone owners planned to upgrade to the iPhone 4S, the release of an LTE iPhone later this year would imply a base case of 148 million and bull case of 160 million upgrade purchases, supplemented by 38 million and 86 million shipments to new users.











Huberty named China and other emerging markets, like Brazil, as "huge untapped markets" for Apple that present a long-term upside for the company. Emerging markets have 14 times as many members of the smartphone-friendly 25- to 34-year-old age group than Western Europe and North America. Apple only directly address 20 percent of China's high-end subscriber market, Huberty said, adding that a China Mobile-compatible iPhone would reach the other 80 percent.



Morgan Stanley presented its $80 earnings per share and $960 valuation bull case as "reasonable" because of several factors: Apple's capital expenditure forecast predicts a "similar revenue trajectory;" the estimate doesn't include new product categories such as an HDTV or a low-price iPhone; the forecast of 129 million iPad units is in-line with current survey data; predictions for iPhone growth, with the exception of China, assume an average upgrade rate and a new subscriber increase similar to calendar 2011 and the firm assumes "no multiple expansion despite a possible dividend."



Apple expects to spend $7 billion on capital expenditures in fiscal 2012, possibly implying fiscal year revenue of as much as $190 billion. Morgan Stanley believes the "vast majority" of that will go to equipment purchases for its suppliers that will help the company get a leg up on its competitors.











The analyst did go on to outline potential risks factored into the bank's $405 Bear Case valuation. Lower carrier subsidies, increased competition in low-price smartphone and tablet markets, competition from Microsoft's Windows 8 in developed markets, lack of product roadmap visibility beyond 2013 after last year's management change and multiple compression as growth slows were all named as risks for Apple.



[ View article on AppleInsider ]

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Comments

  • friedlobsterfriedlobster Posts: 386member
    Holy crap
  • ibgarrettibgarrett Posts: 19member
    Yeah - and here I thought the mid-$500 range was getting a little silly... Glad I bought some down at $128...
  • cvaldes1831cvaldes1831 Posts: 1,832member
    AI never seems to point this out (MacRumors is now pointing out Gene Munster's unreliability), but Katy Huberty is one of the worst AAPL analysts and certainly isn't a star-rated analyst per StarMine.



    AI readers should categorically toss all AI articles with references to Munster, Shaw Wu, Huberty, and a a few others into the circular bin.



    Without the caveat emptor, they are worthless. As a matter of fact, it might be better to take an opposite position from what those "anal-ists" are predicting since they have garnered a track record in piss-poor accuracy.
  • laleslales Posts: 31member
    Quote:
    Originally Posted by cvaldes1831 View Post


    Katy Huberty is one of the worst AAPL analysts and certainly isn't a star-rated analyst per StarMine.



    As soon as I saw the AI headline, my first thought was "Uh, oh. Maybe I'd better sell my Apple stock".
  • bdkennedy1bdkennedy1 Posts: 1,459member
    Almost doubling the stock is a little bit ridiculous.
  • michael scripmichael scrip Posts: 1,856member
    Quote:
    Originally Posted by bdkennedy1 View Post


    Almost doubling the stock is a little bit ridiculous.



    It already doubled in price from 2 years ago.



    Considering the sales of Apple products lately... the stock price doubling next year is a definite possibility.
  • golden galagolden gala Posts: 16member
    Quote:
    Originally Posted by Michael Scrip View Post


    It already doubled in price from 2 years ago.



    Considering the sales of Apple products lately... the stock price doubling next year is a definite possibility.



    I agree. I've been saying the stock could hit $1000. in the next 3 - 5 yrs--but if it doubles in the next year, then what?
  • esummersesummers Posts: 871member
    They say the next iPhone will have a higher resolution screen.... What is the point in going higher resolution then your retina? I can see a wider color gamut, a reflective screen, tactile screen, or a 3D screen. I kinda doubt anything other then better color gamut is possible right now though.
  • slurpyslurpy Posts: 4,470member
    Quote:
    Originally Posted by esummers View Post


    They say the next iPhone will have a higher resolution screen.... What is the point in going higher resolution then your retina? I can see a wider color gamut, a reflective screen, tactile screen, or a 3D screen. I kinda doubt anything other then better color gamut is possible right now though.



    Uh, the next iPhone will only have a higher resolution screen if it's larger in size- I thought thats an obvious assumption. However, I don't even see the need to up the rez even if it is larger, seeing as long its already at such a high dpi and I'm not sure if it would be worth the fragmentation and developer headache. My ideal situation is the screen size being upped to 4.0" and maintaining the same resolution.
  • wizard69wizard69 Posts: 11,522member
    Not to mention one slip up with a new product could be very negative. Especially with Apples reliance upon often one device per category. One iPad or iPhone release that generates a negative feeling in the buying community would result in sharp drop in price. Even a poorly received iMac release would not go over well.





    So while Apple may be flying high right now their marketing habits leave them exposed to a negative side that few other companies need worry about. In other words Apple has the potential to swing in either direction dramatically. This should surprise no one.
  • tylerk36tylerk36 Posts: 1,037member
    Wow and they were saying apple would cool off.
  • michael scripmichael scrip Posts: 1,856member
    Quote:
    Originally Posted by wizard69 View Post


    Not to mention one slip up with a new product could be very negative. Especially with Apples reliance upon often one device per category. One iPad or iPhone release that generates a negative feeling in the buying community would result in sharp drop in price. Even a poorly received iMac release would not go over well.





    So while Apple may be flying high right now their marketing habits leave them exposed to a negative side that few other companies need worry about. In other words Apple has the potential to swing in either direction dramatically. This should surprise no one.



    I think Apple knows this and are VERY careful when designing a new product. Every detail is taken into consideration.



    In contrast... other companies launch 15 new phones every year. If one is a stinker... no big deal.
  • commoncentscommoncents Posts: 68member
    Quote:
    Originally Posted by bdkennedy1 View Post


    Almost doubling the stock is a little bit ridiculous.



    It is not only ridiculous...it is absurd. But so is the growth in earnings that Apple has been accomplishing.



    Earnings have been accelerating. They roughly doubled over the past year; if they slow a bit...let's say to a 60% growth in earnings, and Apple starts to use it's outrageous cash hoard to retire a substantial number of shares, having the share price go up 70% from here over the next year would be expected.



    Ridiculous? Yes. To be expected? Yes.
  • commoncentscommoncents Posts: 68member
    Quote:
    Originally Posted by wizard69 View Post


    Not to mention one slip up with a new product could be very negative. Especially with Apples reliance upon often one device per category. One iPad or iPhone release that generates a negative feeling in the buying community would result in sharp drop in price. Even a poorly received iMac release would not go over well.





    So while Apple may be flying high right now their marketing habits leave them exposed to a negative side that few other companies need worry about. In other words Apple has the potential to swing in either direction dramatically. This should surprise no one.





    I think you are completely off base with this "analysis". Apple has both an enormously loyal customer base with industry-leading satisfaction rates, as well as a long and consistent history of steady product improvements. It is selling products with enormous market potential. The iPad is well on its way to becoming a gorilla (an enabling technology...iOS...with enormous market share and high switching costs). The growing ecosystem with iCloud seamlessly integrating all one's devices.



    The idea that this huge avalanche of success is one small mis-step away from catastrophe is absurd.
  • constable odoconstable odo Posts: 1,041member
    At this rate, Apple's share price might pass Google's share price by the end of the year. I would have thought that to be impossible last year. I notice that Apple is a little less than $50 below Google now. Record iPad sales and a blowout quarter would really boost Apple's shares. Of course, Google would have to slow down a bit. Early last year, I didn't think Apple's market cap would exceed ExxonMobil's market cap either, so Apple is really full of surprises. Estimates continue to rise. Apple may go through a month or two of trading sideways this year, but I definitely won't complain. Apple is absolutely the best company on the planet and I'm glad I'm a shareholder. I didn't even think that Apple would hit $600 in all of 2012, but these past few weeks have shown me that anything is possible with Apple.
  • radster360radster360 Posts: 483member
    Quote:
    Originally Posted by wizard69 View Post


    Not to mention one slip up with a new product could be very negative. Especially with Apples reliance upon often one device per category. One iPad or iPhone release that generates a negative feeling in the buying community would result in sharp drop in price. Even a poorly received iMac release would not go over well.





    So while Apple may be flying high right now their marketing habits leave them exposed to a negative side that few other companies need worry about. In other words Apple has the potential to swing in either direction dramatically. This should surprise no one.



    As one of the poster responded, I am sure Apple is certainly aware of it. If you look in past history, Apple had made some mistakes - I think iPod Shuffle was and still is. People keep worried about competitors catching up - So how many chances did Apple gave them? Plenty and they keep raising the ante. So, at end of the day, I am not really concerned about that. The Apple TV was really an hobby and apparently it is not doing too bad.



    Though, I am a bit concerned about all the analysts upping the target on Apple. I think there is some level of exuberance and I am afraid it is going to hurt no help Apple's price. Now, my average cost has been around $125 or so and it is not getting down to that level, except if there was a split.
  • solipsismxsolipsismx Posts: 19,566member
    Apple has typically beaten the estimates, even the bullish ones. Assuming nothing changes with the number of shares Apple's price will need to be $1,072.54 for Apple to be valued at 1 trillion dollars.







    Quote:
    Originally Posted by radster360 View Post


    Apple had made some mistakes - I think iPod Shuffle was and still is.



    I don't see how the Shuffle was a mistake.
  • freerangefreerange Posts: 1,451member
    Quote:
    Originally Posted by wizard69 View Post


    Not to mention one slip up with a new product could be very negative. Especially with Apples reliance upon often one device per category. One iPad or iPhone release that generates a negative feeling in the buying community would result in sharp drop in price. Even a poorly received iMac release would not go over well.



    So while Apple may be flying high right now their marketing habits leave them exposed to a negative side that few other companies need worry about. In other words Apple has the potential to swing in either direction dramatically. This should surprise no one.



    Utter rubbish! You show a complete lack of understanding of Apple's vision, culture and management team. It is in fact not about one product but an entire ecosystem tied together by multiple products. Although one product could cause a hiccup, even negative reviews to date have not had a material effect as Apple consistently delivers.
  • digitalclipsdigitalclips Posts: 15,203member
    I have been saying Apple will be a trillion dollar company within a few years for a long time. I was laughed at many times. I still feel strongly this will indeed happen. Even I will be shocked if it happens in the next two years but if Apple beat the Bulls again then it's far closer than I imagined.
  • solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by digitalclips View Post


    I have been saying Apple will be a trillion dollar company within a few years for a long time. I was laughed at many times. I still feel strongly this will indeed happen. Even I will be shocked if it happens in the next two years but if Apple beat the Bulls again then it's far closer than I imagined.



    Value wise we're barely over half way so a lot can happen, but I do think it will happen. Does the stock market take a dip, grow, or does its own thing during a major election season?
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