'Now is the time to invest' in Apple ahead of new product launches, Morgan Stanley says
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.
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.
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.
Comments
That's what I thought 2 years ago, still holding and waiting...
That's what I thought 2 years ago, still holding and waiting...
You & me both broski. I wouldn´t mind +45%.
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.
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.
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.
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.
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.
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.
What are you going on about? Apple's buyback program is well known. It's a good use of all that free cash.
Yaaaawn
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.
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!
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.