Morgan Stanley ups Apple price target to $110, sees sales of up to 60M 'iWatch' units in first year

Posted:
in AAPL Investors edited July 2014
Strong customer loyalty for Apple's iPhone is predicted by Morgan Stanley to drive a so-called "halo effect" for sales of the company's rumored "iWatch," prompting the investment firm on Monday to increase its price target for AAPL stock to $110.




The new price target from Morgan Stanley, which would represent an all-time high for shares of AAPL if the prediction were to come true, was revealed in a research note to investors, a copy of which was provided to AppleInsider. In the short term, analyst Katy Huberty expects Apple will report results at the high end of Wall Street expectations when it reveals the results of its just-concluded June quarter next Tuesday.

But looking ahead to the fall and beyond, Huberty has particularly high hopes for the anticipated debut of a wrist-worn "iWatch" from Apple. She said current smart watch sales should not be used as a predictor for how a product from Apple might fare, and instead investors should look to how the company has successfully managed to sell new product categories to existing customers.

The so-called "halo effect" was first used to describe how iPod owners were switching from Windows PCs to Apple's Mac platform. But going forward, Huberty believes that the same effect may help drive strong initial sales of the "iWatch."




She sees a range of 30 million to 60 million "iWatch" units being sold in the first 12 months of availability. Her models assume an average selling price of $300 and gross margins between 40 percent and 50 percent.

She noted that historically, investors have underestimated sales of new Apple product categories based on the limited success of established products. For example, investors originally compared the iPod to the Sony Walkman, the iPhone to BlackBerry, and the iPad to netbooks, she said.

She also noted that loyalty to the iPhone brand has been increasing over time, growing from 73 percent in December of 2011 to 90 percent in March of 2014. She believes that kind of loyalty will bring new users to the "iWatch" in the first year.

Morgan Stanley's new price target is up from its previous prediction of $99. The firm also provides investors with a valuation range, which currently ranges from a bull-case high end of $132 per share, to a bear case of $74.

Comments

  • Reply 1 of 16
    paxmanpaxman Posts: 4,595member
    60 million iWatches in the first year. Lofty predictions for an as of yet unspecified and unannounced product.
  • Reply 2 of 16
    tallest skiltallest skil Posts: 43,399member

    Apple will sell 500,000,000 iTV on the first day.

     

    There. Now tank the stock when I’m wrong.

     

    Oh, and pay me $80,000 a year. These analyses don’t come cheap, you know.

  • Reply 3 of 16
    SpamSandwichSpamSandwich Posts: 31,090member
    Looks like the whole market is up this morning, but AAPL is up quite a bit...
  • Reply 4 of 16
    dickprinterdickprinter Posts: 1,060member
    Quote:

    Originally Posted by AppleInsider View Post



    Morgan Stanley's new price target is up from its previous prediction of $99. The firm also provides investors with a valuation range, which currently ranges from a bull-case high end of $132 per share, to a bear case of $74.

     

    +/- 30%???

     

    Well, that target range certainly covers her ass...

  • Reply 5 of 16
    rogifanrogifan Posts: 10,669member
  • Reply 6 of 16
    tallest skiltallest skil Posts: 43,399member
    Originally Posted by Dickprinter View Post

    +/- 30%??? Well, that target range certainly covers her ass...


     

    You don’t mean it, but that’s a pretty good insult as to the proportions of her size of her measurements, after all. So I’ll take it. She deserves it.

  • Reply 7 of 16
    MarvinMarvin Posts: 14,217moderator
    analyst Katy Huberty

    1000
  • Reply 8 of 16
    froodfrood Posts: 771member
    Quote:

    Originally Posted by Tallest Skil View Post

     

    Apple will sell 500,000,000 iTV on the first day.

     

    There. Now tank the stock when I’m wrong.

     

    Oh, and pay me $80,000 a year. These analyses don’t come cheap, you know.


     

    So do you believe Apple shares should be priced higher, or lower, than they currently are?

  • Reply 9 of 16
    tallest skiltallest skil Posts: 43,399member
    Originally Posted by Frood View Post

    So do you believe Apple shares should be priced higher, or lower, than they currently are?

     

    Whichever will net me, personally, the most money, either from my handlers for shorting or from selling stock. Higher.

  • Reply 10 of 16
    dewmedewme Posts: 2,054member
    The silliness quotient on this prediction is almost comical and paints Apple customers in a poor light. Granted, if Apple comes out with a wristworn computing device chances are pretty high that it will not suck. But to say it will sell 60M units when consumers have no idea about what it will do or whether they need it makes it sound like Apple customers will buy anything that Apple sells regardless of its merit. That's nuts and fortunately Apple knows it too. But it makes for a good Monday morning laugh at Morgan Stanley's expense. What a bunch of goofballs.
  • Reply 11 of 16
    splifsplif Posts: 592member

    Looks like Wall Street wants to make money off of Apple again. Then when Apple does not meet their imaginary expectations they can downgrade the stock & play this game all over again.

  • Reply 12 of 16
    gatorguygatorguy Posts: 20,583member
    splif wrote: »
    Looks like Wall Street wants to make money off of Apple again. Then when Apple does not meet their imaginary expectations they can downgrade the stock & play this game all over again.
    Wall Street wouldn't turn down money from a stoning if they could figure out a good angle. :\
  • Reply 13 of 16
    waybacmacwaybacmac Posts: 309member

    I still cannot believe that there will be a single "iWatch". As I go over all the stuff I've read, I can count at least three possible models: 1) a fitness model, 2) a health monitor (maybe even two, specialized for cardiac problems and for diabetes), and 3) a luxury model (think real Swiss movement with a subtle notification function - maybe not a watch per se but a technology to be licensed).

     

    Plus, even though they got the trademark, I can't believe Apple would actually use the name "iWatch".

  • Reply 14 of 16
    SpamSandwichSpamSandwich Posts: 31,090member
    gatorguy wrote: »
    Wall Street wouldn't turn down money from a stoning if they could figure out a good angle. :\

    Marijuana stocks. ????
  • Reply 15 of 16
    rogifan wrote: »
    Huh, they'll probably price it at $1000 and throw in gs5 in metal body, oh and a quad hd larger screen so it's gimmick.
  • Reply 16 of 16
    badmonkbadmonk Posts: 793member
    so this is my prediction:

    1) the iWatch will debut at a price greater than $500 & be a luxury item

    2) the analysts and tech pundits will slam Apple for its outrageous pricing

    3) we will all want one

    4) they will sell like hotcakes

    5) the other competitors will give up trying to compete

    6) except Samsung who will make a crappy
    big screen version

    tell me i'm wrong
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