Morgan Stanley: Apple stock no longer a 'Best Idea,' but still recommended
Though it still recommends the stock to investors, Morgan Stanley this week removed Apple from its "Best Ideas" list, citing the company's outperformance of the market over the last six months.
However, analyst Katy Huberty noted that AAPL remains a "top pick" due to long-term growth potential for the company. But Apple is no longer on the company's "best ideas" list, because it was up 28 percent over the last six months, while the S&P was up 14 percent.
Huberty said that in the last half-year, the gap between her estimates and Wall Street consensus has narrowed, which contributed to the stock being removed from the list.
AAPL was named a "Best Idea" for investors by Morgan Stanley this May, highlighting the stock as one of the best options on Wall Street. It was a major turnaround for Huberty, who was notoriously negative on the company's stock, suggesting the iPhone was too expensive even at a $199 subsidized price.
Still, this week Huberty said she sees four key long-term growth drivers for the company's stock. They are:
Smartphone market growth and expanded iPhone distribution
The tablet market opportunity
Rising enterprise adoption
The Chinese consumer
She also disagrees with some investor concerns that Apple's margins may have peaked. The company has warned investors that its gross margins will continue to decline due to aggressive pricing on new products like the iPad and MacBook Air.
"We believe Apple will limit major iterations to its product line in (calendar year 2011) in order to flow component cost and manufacturing yield/volume benefits through to the bottom line," Huberty wrote. "As a result, we see upside to both (calendar fourth quarter 2010) and (calendar year 2011) gross margin expectations."
The analyst expects an iPhone on the Verizon network in early 2011, a new, lower priced iPad in April, and the iPhone 5 in June 2011. She also predicts a "smart TV," redesigned iPad and 4G LTE iPhone from Apple all in 2012.
However, analyst Katy Huberty noted that AAPL remains a "top pick" due to long-term growth potential for the company. But Apple is no longer on the company's "best ideas" list, because it was up 28 percent over the last six months, while the S&P was up 14 percent.
Huberty said that in the last half-year, the gap between her estimates and Wall Street consensus has narrowed, which contributed to the stock being removed from the list.
AAPL was named a "Best Idea" for investors by Morgan Stanley this May, highlighting the stock as one of the best options on Wall Street. It was a major turnaround for Huberty, who was notoriously negative on the company's stock, suggesting the iPhone was too expensive even at a $199 subsidized price.
Still, this week Huberty said she sees four key long-term growth drivers for the company's stock. They are:
Smartphone market growth and expanded iPhone distribution
The tablet market opportunity
Rising enterprise adoption
The Chinese consumer
She also disagrees with some investor concerns that Apple's margins may have peaked. The company has warned investors that its gross margins will continue to decline due to aggressive pricing on new products like the iPad and MacBook Air.
"We believe Apple will limit major iterations to its product line in (calendar year 2011) in order to flow component cost and manufacturing yield/volume benefits through to the bottom line," Huberty wrote. "As a result, we see upside to both (calendar fourth quarter 2010) and (calendar year 2011) gross margin expectations."
The analyst expects an iPhone on the Verizon network in early 2011, a new, lower priced iPad in April, and the iPhone 5 in June 2011. She also predicts a "smart TV," redesigned iPad and 4G LTE iPhone from Apple all in 2012.
Comments
Most knowledgeable analysts passed that point months ago. Many run $400-430, nowadays.
Of course, she gives herself a cone of safety which is truly lacking confidence in her abilities to analyze.
However, analyst Katy Huberty noted that AAPL remains a "top pick" due to long-term growth potential for the company. But Apple is no longer on the company's "best ideas" list, because it was up 28 percent over the last six months, while the S&P was up 14 percent.
cause double the average market isn't great...
She also predicts a "smart TV," from Apple all in 2012.
wait.... do you mean like the Apple TV....
Second thoughts. Maybe not.
$375 price target?
Most knowledgeable analysts passed that point months ago. Many run $400-430, nowadays.
Of course, she gives herself a cone of safety which is truly lacking confidence in her abilities to analyze.
Actually, knowing how Apple stock bounces all over the place with rumors and fact I could very well see apples stock bouncing around in that cone of hers, it actually a good view of what to expect next year.
She is actually telling investor if you buy now here is what to expect so do not be surprise if it goes up or down in that range.
I can just imagine her report ended with ... 'sent from my Blackberry'
Classic Huberty, always wrong.
Here's hoping to another 20% before the end of January!
Here's hoping to another 20% before the end of January!
The other day a shoe shine boy was telling me ab out the money he made with Apple stock. He recommended that I buy more.
Joseph P. had a comment on this situation.
She finished the 'pump', now the 'dump'.
Classic Huberty, always wrong.
So you are accusing her of committing a federal crime? I won't ask you for your evidence for this, because I know you haven't got any.
I can somewhat understand the partisanship on a board like this, but actual stock investors need to go about it with something more than a white cane and wishful thinking. While you are free to agree or disagree with her analysis (a factual basis will be taken more seriously), she does raise valid points which actual investors are actually thinking about.
Looks like she is leaving at least 6 months too early in my book. AAPL does plateau for a period before running higher, and it looks to me like there is a month left before the next one. China alone can help Apple meet all the optimistic growth targets... And they aren't even providing enough supply there to meet demand.
Here's hoping to another 20% before the end of January!
She hasn't "left" the stock. Morgan still recommends it, they are simply taking off one of their special lists. We've seen this kind of thing before and we'll see it again.
I can somewhat understand the partisanship on a board like this, but actual stock investors need to go about it with something more than a white cane and wishful thinking. While you are free to agree or disagree with her analysis (a factual basis will be taken more seriously), she does raise valid points which actual investors are actually thinking about.
The problem is Huberty like most analysts doesn't have a clue. They usually make a move after the stock is well on it's way up or down. Huberty gave Apple a $95 target way back in December 2008. The stock has been on a steady rise since then. As a matter of fact if you would have bought some 2 days after her target, you made a messily 242%.
The problem is Huberty like most analysts doesn't have a clue. They usually make a move after the stock is well on it's way up or down. Huberty gave Apple a $95 target way back in December 2008. The stock has been on a steady rise since then. As a matter of fact if you would have bought some 2 days after her target, you made a messily 242%.
Yes, some of them are better than others in their forecasts. But most people don't seem to understand several important things about these analysts. First, they are making these comments for the consumption of their clients. Second, they are constitutionally conservative. Third, they are constantly revising their estimates for the companies they cover. I'm not sticking up for Huberty in particular, but I think it's more than a little unfair to criticize any analyst's forecasts made during the midst of the 2008 market panic. The wheels were falling off and nobody knew what was going to happen next. As it was, we ended up with two years of miserable economic growth -- and it could have been much, much worse. So if you consider this in light of the three things I mentioned above, forecasts should come as much less of a surprise.
Anyway, even though James Cramer on CNBC might be loud and obnoxious, but he sticks with his recommendations (even if his recommendation is going down) and he more like the guy on the street. Sure, he had made bad calls, but overall he is the stock analyst for rest of us.
Windows phone 7 is now here. The Apple hegemony is over...
The other day a shoe shine boy was telling me ab out the money he made with Apple stock. He recommended that I buy more.
Joseph P. had a comment on this situation.
That may in fact be the ONLY valid stock comment on this board today. I'd worry more except that Apple still can't make the product(s) fast enough, so we are still short of bubble-land.
"We don't recommend buying your stock because we don't think your product will do well against the competition, or the product is an unknown device we're not sure people will like, or your margins are too high to compete in a commodity market against millions of common-denominator products."
Fast forward...
"We don't recommend buying your stock because you have out-performed our expectations, and we don't think there is any more 'up' - you have reached our imaginary ceiling, plus you've told us your margins are going to drop as you build the most price competitive product in its segment, and because demand is so high, it's nearly impossible for you to build enough devices to gratify everyone instantly."