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'Now is the time to invest' in Apple ahead of new product launches, Morgan Stanley says

post #1 of 37
Thread Starter 
A strong recommendation for Apple stock was pushed by investment firm Morgan Stanley on Thursday, which said now is the right time to invest due to low institutional ownership, resilient iPhone sales, and anticipated upcoming product launches.




Analyst Katy Huberty believes shares of AAPL have been "de-risked" ahead of upcoming product cycles, she said in her latest research note, a copy of which was provided to AppleInsider. If investors are on the fence about Apple stock, she said now is the right time to buy in before upcoming growth.
Morgan Stanley's Katy Huberty expects Apple will enter the mobile payment and wearable devices markets.
Specifically, she said her recent analysis shows that Apple stock tends to improve after periods of growth in research and development, as the company invests in new product categories. She cited R&D investment ahead of the launches of the iPod in 2000 and 2001, before the iPhone in 2005 and 2006, and ahead of the iPad in 2008 and 2009.

Similar to those periods, Apple has kept its R&D spending growing more than 30 percent year over year for the period between 2010 and 2013. In Huberty's view, it's "likely" that some of Apple's recent investments were in new product categories.

Specifically, she expects that Apple may be about to enter the mobile payments space, and could also make its first official foray into the wearable connected electronics market.

In addition, investors are currently underestimating both Apple's ability to innovate and launch new products, as well as the value of its existing user base, many of which have active iTunes accounts with connected credit cards.

Even before Apple launches new products, Huberty also believes that institutional ownership of Apple stock is too low. She already highlighted this trend in February, when her research found that institutional investors' stake in Apple was at a new 5-year low.




The analyst also believes that iPhone demand may have been slightly better than expected in the just-concluded March quarter. A recent survey by Morgan Stanley and AlphaWise suggests to her that Apple may have sold 38 million units in the three-month span, and she sees the potential for "modest upside" to that estimate.

She sees the potential for Apple to report revenue of $44.5 billion for the March quarter, with gross margin of 38.2 percent and earnings per share of $10.80.

Finally, Huberty also made note that Apple bought back at least $14 billion of its own stock last quarter. Assuming a share price of $500 around the time that the buyback occurred, the analyst calculates that the buyback could add 19 cents to earnings per share for the March quarter.

With a strong recommendation for investors to buy AAPL, Morgan Stanley has maintained its price target of $630 with an "overweight" rating. The increase to that target was made in December.
post #2 of 37

That's what I thought 2 years ago, still holding and waiting...

post #3 of 37
Quote:
Originally Posted by techguy911 View Post
 

That's what I thought 2 years ago, still holding and waiting...

You & me both broski. I wouldn´t mind +45%.

post #4 of 37

Doubtful. After Apple's rise, Wall Street has seen fit to artificially manipulate the price down. The current stock price reflects absolutely nothing. It is all fake. All a scam. It is not based on anything real, except a bunch of thieves tweaking numbers in between bets.

 

Gambling with your friends is illegal, but the stock market is legal. The world makes no sense.

post #5 of 37

Google just reported earnings yesterday:

 

$5.04 GAAP EPS vs $4.97 last year.

That is 1% earnings growth.  Yet the stock is barely down for the week.  BS.  Total BS.  Last quarter Apple reported a 5% increase in EPS earnings and the stock went down 10%.

 

But guess what?  You won't see any of the media report the $5.04 GAAP EPS but rather the non-GAAP $6.27 EPS.  Total manipulation.  GAAP is the standard for financial reporting in the USA but for some reason the media and pundits are okay with using Google's total BS non-GAAP calculations.  The same calculations that don't account for stock based compensation and losses from discontinued operations (Motorola).  So those things did not happen?  WTF.  So Google pays their executives billions of dollars and that does not get reflected in EPS?  So they lose Billions on Motorola and that does not effect EPS?

 

Total and utter BS.

post #6 of 37
Can't see why....I usually see Apple's stock go down after a product announcement.

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post #7 of 37
Quote:
Originally Posted by pmz View Post

Doubtful. After Apple's rise, Wall Street has seen fit to artificially manipulate the price down. The current stock price reflects absolutely nothing. It is all fake. All a scam. It is not based on anything real, except a bunch of thieves tweaking numbers in between bets.

Gambling with your friends is illegal, but the stock market is legal. The world makes no sense.
A few weeks ago on CNBC they mentioned that both Google and Amazon missed 3 out of 4 quarters. But you wouldn't know that based on what their stock did. Google stock is up over 40% YTD. I'm still trying to understand how Apple got into this situation where they go quiet for 6-8 months at a time, which allows others to drive the narrative. I really hope this isn't the new norm at Apple.
post #8 of 37
finally an analyst who makes some sense...as a longterm APPL investor you will see times where Apple goes out of favor with Wall Street. People talk about Apple's inability to innovate but long periods goes without product launches as Apple "perfects its game." For instance, the five+ years between the ipod & iphone debuts...which was very productive time for Apple (even if the Street is clueless).
post #9 of 37
Quote:
Originally Posted by sog35 View Post

Google just reported earnings yesterday:

$5.04 GAAP EPS vs $4.97 last year.
That is 1% earnings growth.  Yet the stock is barely down for the week.  BS.  Total BS.  Last quarter Apple reported a 5% increase in EPS earnings and the stock went down 10%.

But guess what?  You won't see any of the media report the $5.04 GAAP EPS but rather the non-GAAP $6.27 EPS.  Total manipulation.  GAAP is the standard for financial reporting in the USA but for some reason the media and pundits are okay with using Google's total BS non-GAAP calculations.  The same calculations that don't account for stock based compensation and losses from discontinued operations (Motorola).  So those things did not happen?  WTF.  So Google pays their executives billions of dollars and that does not get reflected in EPS?  So they lose Billions on Motorola and that does not effect EPS?

Total and utter BS.
This morning on CNBC Jim Cramer said Google is going way higher in the next two weeks and his charitable trust is scooping up the stock. Amazing how they can miss 3 of the last 4 quarters but the stock is up over 40% this year. Yeah it might end the day down 1-2%, but it was up nearly 4% yesterday so big deal.
post #10 of 37

And you were rewarded for your patience with massive dividends, as well as positioned to see higher ROI on your initial investment. That's how it's supposed to work. The institutional big traders and high speed hedge funds are the ones who've been monkeying with AAPL for several years, usually in 4Q - after the annual October release of new product, which then further gives the market and the small investor the yips, totally unnecessarily. 

post #11 of 37
Quote:
Originally Posted by pmz View Post
 

Doubtful. After Apple's rise, Wall Street has seen fit to artificially manipulate the price down. The current stock price reflects absolutely nothing. It is all fake. All a scam. It is not based on anything real, except a bunch of thieves tweaking numbers in between bets.

 

Gambling with your friends is illegal, but the stock market is legal. The world makes no sense.


That's why I no longer buy individual stocks. Too risky. No matter, you think a stock is going to go up and it goes down and the other way around. Best to just invest in a diversified portfolio of low-cost index funds which beat analysts and you and I the great majority of the time and the costs are far lower (compared to managed funds).

 

Just read "A Random Walk Down Wall Street" and most of the books was decades of evidence that people can't outsmart the market. John Bogle of Vanguard wrote a book on the same topic.

post #12 of 37
I think this is one of those times where there is very little risk of Apple not introducing new products. Aging population means increased demand for screen real estate. Samsung got on this gravy train earlier because they make the best screens and can control their own supply. Apple has had to diversify it's supply chain away from Samsung. That cost time and money.

The time is up and the money was never a problem. Apple hasn't said anything officially, but they bought $14 Billion worth of shares when the price was at $500 in Jan. Actions are speaking louder than words.
post #13 of 37
Quote:
Originally Posted by pfisher View Post


That's why I no longer buy individual stocks. Too risky. No matter, you think a stock is going to go up and it goes down and the other way around. Best to just invest in a diversified portfolio of low-cost index funds which beat analysts and you and I the great majority of the time and the costs are far lower (compared to managed funds).

Just read "A Random Walk Down Wall Street" and most of the books was decades of evidence that people can't outsmart the market. John Bogle of Vanguard wrote a book on the same topic.

That makes no sense. Nothing prevents you from duplicating the diversification of a fund on your own. You can even choose to duplicate the buy-sell strategy of Warren Buffet, if you're so inclined.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

Reply
post #14 of 37
Quote:
Originally Posted by sog35 View Post

Google just reported earnings yesterday:

$5.04 GAAP EPS vs $4.97 last year.
That is 1% earnings growth.  Yet the stock is barely down for the week.  BS.  Total BS.  Last quarter Apple reported a 5% increase in EPS earnings and the stock went down 10%.

But guess what?  You won't see any of the media report the $5.04 GAAP EPS but rather the non-GAAP $6.27 EPS.  Total manipulation.  GAAP is the standard for financial reporting in the USA but for some reason the media and pundits are okay with using Google's total BS non-GAAP calculations.  The same calculations that don't account for stock based compensation and losses from discontinued operations (Motorola).  So those things did not happen?  WTF.  So Google pays their executives billions of dollars and that does not get reflected in EPS?  So they lose Billions on Motorola and that does not effect EPS?

Total and utter BS.

Take advantage of this. Every time Apple drops down into the area, buy buy buy. The chance of losing money here is very very minimal. Apple will sell 75million iPhones this Holiday qtr. do you actually think the stock will be at $500 then. I hope Apple drops to $400 after earnings. And I say that as a person that holds 550 shares. Cook needs to take his head out of his butt and buy back $100B of their shares and get rid of their silly dividend. Apple's cash should not be used on dividends when they trade at a 7 forward multiple, it should be used for buy backs and acquisitions. It worries me that the company thinks they need to increase dividends in order to get people to invest in them. Btw, Goog trades at a 35PE because they monopolize search and are and have been getting into many other future technologies. Investors see Apple as the iPhone,and one slip-up could spell disaster for the company; unrightfully so.
post #15 of 37
Quote:
Originally Posted by Macnewsjunkie View Post

I think this is one of those times where there is very little risk of Apple not introducing new products. Aging population means increased demand for screen real estate. Samsung got on this gravy train earlier because they make the best screens and can control their own supply. Apple has had to diversify it's supply chain away from Samsung. That cost time and money.

The time is up and the money was never a problem. Apple hasn't said anything officially, but they bought $14 Billion worth of shares when the price was at $500 in Jan. Actions are speaking louder than words.

What are you going on about? Apple's buyback program is well known. It's a good use of all that free cash.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

Reply
post #16 of 37
Apple has one major problem. They can't lower prices. They can't sell a cheap phone and never will. That precludes 80% of the world's population of ever owning an iPhone. They have chosen premium products with very high margins in lieu of selling 300m iPhones a year at 15-20% margins. I believe this is a wise decision right now. What worries me, is the competition has caught up, and for Apple to grow in the future, they need to innovate at a faster clip than they have in the last 2 years.
post #17 of 37
Quote:
Originally Posted by SpamSandwich View Post

What are you going on about? Apple's buyback program is well known. It's a good use of all that free cash.

Yaaaawn
post #18 of 37
"The analyst also believes that iPhone demand may have been slightly better than expected in the just-concluded March quarter."
Watching the Fiksu adoption data over the past six months shows that the combined iPhone 5s and 5c are running +0.13% of active iPhone population per day. That rate has been solid across the last 4 months. I interpret the data as documenting that 5s & 5c sales continue to be supply constrained. Apple is likely selling every one it can make.
post #19 of 37
Good one, Morgan.
Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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post #20 of 37
Quote:
Originally Posted by Eric38 View Post


Take advantage of this. Every time Apple drops down into the area, buy buy buy. The chance of losing money here is very very minimal. Apple will sell 75million iPhones this Holiday qtr. do you actually think the stock will be at $500 then. I hope Apple drops to $400 after earnings. And I say that as a person that holds 550 shares. Cook needs to take his head out of his butt and buy back $100B of their shares and get rid of their silly dividend. Apple's cash should not be used on dividends when they trade at a 7 forward multiple, it should be used for buy backs and acquisitions. It worries me that the company thinks they need to increase dividends in order to get people to invest in them. Btw, Goog trades at a 35PE because they monopolize search and are and have been getting into many other future technologies. Investors see Apple as the iPhone,and one slip-up could spell disaster for the company; unrightfully so.

 

Google does not have a monopoly on advertising.

 

Facebook is making inroads.  And yahoo is talking with Apple to make Yahoo search the default search instead of Google.  That alone would crush revenue by 30%.  Every year PC search is going down and mobile search is going up.  That lowers Google's gross profit. 

post #21 of 37
Quote:
Originally Posted by macxpress View Post

I usually see Apple's stock go down after a product announcement.

 

Too true!  Regardless of the actual stock performance, I'll say that it is at least refreshing to know of ONE analyst from a major firm who thinks Apple has a promising future!

post #22 of 37
Apple seems to cycle between being overbought and oversold. Trust me as someone who has owned the stock for over 15 years. Wait, be patient, be patient. It will pay off.
post #23 of 37
Quote:
Originally Posted by sog35 View Post
 Every year PC search is going down and mobile search is going up. 

This will be interesting to see play out over the next few years.

...and I'm guessing that Samsung and the "cheap" Chinese knock off smart phone companies could not care less about Goog.

post #24 of 37

GOOG makes me nervous as a stock pick.  They're making most of their money on desktop ads and clicks. And yet, the desktop PC market has plateaued.  Mobile and other platforms are growing, and yet, Google is not the powerhouse in mobile it is on the desktop.

 

I personally think Google is highly overrated as a stock, and Apple is highly undervalued.  I agree some manipulation is keeping Apple down, along with a Universal skepticism about Apple's ability to create new product categories.  There is also investor hatred for Apple, from investors who got burned (and analysts who got burned like Gene Munster shouting that the stock would hit 1,000).

 

No matter.  The cream always rises.  Apple is the cream.  2014 is the year of the rise.

 

Going up: Apple mobile, Windows mobile, Tizen mobile, Amazon mobile.

 

Trending down: Google and Android

post #25 of 37
Quote:
Originally Posted by macxpress View Post

Can't see why....I usually see Apple's stock go down after a product announcement.

Exactly this. No matter what Apple release, there is always a bunch of people who are disappointed, usually because they have read some made up crap spouted by some analyst and thought it was going to be true, no matter how ridiculous the claims.

post #26 of 37
Quote:
Originally Posted by Rogifan View Post
 
A few weeks ago on CNBC they mentioned that both Google and Amazon missed 3 out of 4 quarters. But you wouldn't know that based on what their stock did. Google stock is up over 40% YTD.....

You forgot to complete the rest of the sentence: Amazon is down 20% YTD.

 

The market's timing may not correspond to yours. Sometimes prices lead earnings, at other times, it lags. There's no way to tell. At this point, it's quite obvious that there's going to be no traction on Apple's stock price until it introduces something new, and the market believes that it's going to be a needle-moving growth opportunity.

post #27 of 37

The usual market conspiracy theories are out in full force again, I see.

 

There is simply no evidence for it, guys.

post #28 of 37
Quote:
Originally Posted by TeaEarleGreyHot View Post
 

 

Too true!  Regardless of the actual stock performance, I'll say that it is at least refreshing to know of ONE analyst from a major firm who thinks Apple has a promising future!

That's just to lure in suckers.  Almost everyone from the big city knows Apple stock always plummets on earnings and this quarter will be no different.  Most other tech stocks rise into the end of their financial quarters while investors have at least some hope of good things to come.  With Apple, the sell-off should start early and continue well into earnings call.  Apple stock has no support whatsoever and buying Apple stock is simply foolish if you're expecting share price gains.  It's well-known that Apple's share price isn't really tied to anything the company does.  You'd never know whether Apple is doing well or not as a company.

 

There is no good time to buy Apple stock.  A pullback means nothing and can likely be a prelude to an even bigger pullback.  Remember, Apple's stalwart iPhone empire is constantly losing market share and this alone should make investors run for the hills.  Every smartphone vendor in the world has had a large-display smartphone for years, but only Apple wants to charge more for its own late-comer.  How perverse is that?  You think that strategy is going to increase market share?  No way, José.  Apple's share price is going nowhere but down.  Tim Cook will make sure of that.

post #29 of 37
Don't fall for it! We have seen this show too many times. It doesn't matter if Apple beats on the top and bottom this quarter. They did that last quarter and was killed. In this article there is no mention of guidance. The analysts are expecting 9% revenue growth. When was the last time Apple guided that high? They guided 0% growth for this quarter.
post #30 of 37
Best yearly time is always around late May, so yes, but since there all time high in 2012 probably not.
post #31 of 37
Quote:
Originally Posted by pmz View Post

Doubtful. After Apple's rise, Wall Street has seen fit to artificially manipulate the price down. The current stock price reflects absolutely nothing. It is all fake. All a scam. It is not based on anything real, except a bunch of thieves tweaking numbers in between bets.

Gambling with your friends is illegal, but the stock market is legal. The world makes no sense.

I don't think there's ever been a person in this nation's history arrested for gambling with his friends. Ever.

I agree about the market, though. You can buy a million dollar's worth of options right before a company's earnings, and they can be worth zero or $100 million the next day. If that isn't gambling, what is?
post #32 of 37
Quote:
Originally Posted by sog35 View Post

Google does not have a monopoly on advertising.

Facebook is making inroads.  And yahoo is talking with Apple to make Yahoo search the default search instead of Google.  That alone would crush revenue by 30%.  Every year PC search is going down and mobile search is going up.  That lowers Google's gross profit. 

True. It might change down the road. My comment was based on Google
Quote:
Originally Posted by sog35 View Post

Google does not have a monopoly on advertising.

Facebook is making inroads.  And yahoo is talking with Apple to make Yahoo search the default search instead of Google.  That alone would crush revenue by 30%.  Every year PC search is going down and mobile search is going up.  That lowers Google's gross profit. 


Good points. I was using the word "monopoly" very loosely. Guess their market share is a lot lower than I thought.

I thought I read somewhere that Google owns 90% of US search. After googling it, it looks like it has fallen to around 70%, depending on where you get the numbers from. Probably less than 50% worldwide now.

I don't see any drawbacks with partnering with Yahoo on search. Why should Apple continue to strengthen the company behind Android?!
post #33 of 37
Eric, you raised many valid points.

Google worldwide search market share is probably around 70pc, both for desktop and mobile, and slightly and steadily RISING.

Google US desktop search market share roughly 70pc, up 1-2pc per year in the last couple of years, as Bing, Yahoo, ask.com users slowly gravitate to Google.

http://searchengineland.com/bing-ends-2013-with-all-time-high-in-us-market-share-but-google-also-up-comscore-181876

These market share numbers is the share of searches. Share of ad revenue for Google must be substantially higher.

In Europe Google has essentially no competition and market share 90pc+ in most countries, while in certain countries like China, Russia they have strong local competitors and have just 20-30pc.

So overall i guess they have around 70pc in desktop. Since they currently get almost all search requests both from iOS and Android devices, their search share is very high there also.

--> Bottom line: Google has a stable and rising recurring revenue with their ad business (revenue up 20pc y/y this quarter, pre-tax income still up 15pc; the small improvement in net income is due to an increasing tax rate). The online ad business will continue to take share from offline, and Google will benefit in many ways (search, Youtube, Android etc). Their current valuation is not cheap but deserved.

Apple's high margin iphone business however is seen at risk of disruption by ever cheaper Android phones. The latest xiaomi smartphone will cost around USD 130, has great specs and decent looks, and according to a Bloomberg article is eagerly awaited even in Singapore ("iphone cool at half the price").

A while ago AI ran this story that FB's failure to make decent Android apps is due to the fact that most of engineers there personally use iphone.

Within Apple, I think the engineers and managers who call the shots might make a similar mistake. They got so rich from Apple stock options that they now fail to understand that a price difference of 600 dollars (800 dollars for iphone vs 200 for android) matters to most people.
post #34 of 37
I wouldn't trust any analysis from any analyst, be it positive or negative.
post #35 of 37
All of you know nothing about how a stock chart really moves. Live in ignorance and keep believing its manipulated that way you will remain poor
post #36 of 37
Quote:
Originally Posted by Paul94544 View Post

All of you know nothing about how a stock chart really moves. Live in ignorance and keep believing its manipulated that way you will remain poor

Actually, there are a number of very wealthy Apple stockholders here and in fairness, every stockholder of every other company believes their stock is undervalued. 1wink.gif

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

Reply
post #37 of 37
Originally Posted by Paul94544 View Post
All of you know nothing about how a stock chart really moves.

 

So the line in this picture:

 

I guess I don’t know that it exists? Despite being able to see it with my eyes, comprehend it with my mind, and point to any one segment and say what it is why it was?

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