Morgan Stanley raises Apple price target to $126, says investors underestimate Apple Watch

Posted:
in AAPL Investors edited November 2014
Morgan Stanley joins a number of other investment firms that have raised their price targets on shares of Apple stock this week, reflecting significant gains posted by the company heading into the holiday shopping season and in anticipation of next year's debut of the Apple Watch.



Analyst Katy Huberty said in a note to investors this week that she sees shares of Apple reaching $126, up from her previous target of $115. Apple blew past the $115 price point in trading on Thursday, following upgrades on its stock from Morgan Stanley, as well as Evercore and Piper Jaffray.

And while Huberty's new target is set at $126, her range for AAPL stock extends to $150 in Morgan Stanley's "bull case" projection. The analyst said in her note, a copy of which was provided to AppleInsider, that she believes investors are underestimating demand for the upcoming Apple Watch, set to launch in early 2015.




Like the iPhone and iPad before it, the Apple Watch will achieve strong sales right out of the gate, Huberty believes. Her estimates call for 10 percent of the compatible iPhone user base to buy an Apple Watch, which would translate to 30 million units sold in calendar year 2015.

For example, before the first iPhone launched in June 2007, Huberty said Wall Street generally expected Apple to ship 9 million units in fiscal year 2008. In reality, Apple exceeded that number and shipped 12 million units.




And with the iPad, estimates pegged calendar year 2010 shipments at 5 million units, but Apple actually shipped 15 million iPads in the tablet's first year.

Huberty's 30 million unit estimate for the Apple Watch is on the high end of market expectations, but she still believes her number is a conservative guess. That's because Huberty expects that the wearable devices market will be the fastest ramping consumer device category to date, growing even faster than modern smartphones and tablets did after they debuted.

@thisisneil $AAPL PT percent increases (courtesy SIRI)

RBC 4.35%
UBS 8.7%
MS 9.57%
PJ 12.5%
EVC 8%
BTIG 5.47%

average 8%

-- Jim Neal (@jameswneal)


With Huberty's revised price target of $126, a total of four investment firms tracked by AppleInsider have increased their estimates this week alone. Piper Jaffray and Evercore have both set new targets of $135, while RBC Capital Markets raised its target to $120 on Monday.

UBS also upped its target earlier this month to $125. Analysts have been revising their estimates in the wake of recent gains by the company, which has been setting new all-time highs for its stock price following the results of a blockbuster September quarter.

Some, however, have yet to revise their targets, most notably Manyard Um of Wells Fargo Securities. Um has rated AAPL as "market perform," and currently holds a valuation range for the stock at between $92 and $102, even though Apple has not traded in that price range for over a month.
«134

Comments

  • Reply 1 of 67
    Quote:

    Originally Posted by AppleInsider View Post



     which would translate to 30 million units sold in calendar year 23015.

     

    I sure hope they sell more units than that before we get to that year. <img class=" src="http://forums-files.appleinsider.com/images/smilies//lol.gif" />

     

     

    Watch is going to do well. Nice to see an analyst acknowledging this.

  • Reply 2 of 67
    thing is you don't need to watch to make this argument, iPhone 6 numbers are going to be so crazy strong that they will be the instrument of stock price change.
  • Reply 3 of 67

    Says investors underestimate Apple Watch... raises target $11 above current price.

     

    ... $9 under two other investment houses.

  • Reply 4 of 67
    blastdoorblastdoor Posts: 1,931member

    It's so hard to predict the success of a new product category like this. But I think this prediction makes a lot of sense, with one caveat. 

     

    When the iPhone came out I didn't buy one until the 3G became available. I just didn't think the initial iPhone was fully baked.

     

    When the iPad first came out I pre-ordered it. It was the first time I bought a new product category without being able to see it first hand. But to me that was easy to do -- I saw it as just a big iPod Touch, which seemed quite appealing at the time. 

     

    I think the key for me buying Apple Watch v 1.0 is if the S1 is upgradable. If it is, I'll very likely buy v 1.0, but I won't pre-order (I'll want to pick style/band in person). If the S1 can't be upgraded then it's not likely at all that I'll get v 1.0 unless battery life and performance are really, really good. 

     

    So I think the big caveat on whether the Watch does as well as she's projecting is the upgradability. Nobody is going to buy a watch -- particularly a several thousand dollar gold watch -- that is obsolete in a year or two. People have a different expectation for this class of device. I suspect Apple knows this, and certainly the form of the S1 screams upgradable. But I'll want confirmation that it's upgradable -- or that an upgrade isn't necessary because they've hit it out of the park with v 1.0 -- before I buy, and I suspect many others will be in the same boat. 

  • Reply 5 of 67
    mac_128mac_128 Posts: 3,448member
    Quote:

    Originally Posted by Blastdoor View Post

     

    It's so hard to predict the success of a new product category like this.


    This is not really a new product category. It is for Apple, but it's not quite the same as with mobile phones. The market is already saturated with smart-watches, and they aren't really catching on. So far, aside from fit and finish I haven't really seen Apple offering anything that the others aren't -- at least in terms of what the marketplace seems to be demanding. They're offering ?Pay, and that's about it (and that requires a current iPhone). I'm not even sure if the ?Watch is waterproof at this point. There's definitely going to be a small pool of early adopters who buy anything Apple offers, but unlike the iPhone, and the iPad, there just doesn't seem to be horde of consumers clamoring for something better in this category, at least not to pay a premium for it.

     

    I've no doubt that eventually as the ?Watch matures, and developers find indispensable ways to integrate it into our lives it might morph into another powerhouse product for Apple. But at the moment, they're really just one more entry into a crowded field for a product general consumers don't really seem to be demanding. The Rolex-wearing guy isn't going to toss it for an ?Watch. He might buy one as an option, but he's got the disposable income to do it. Most people have to seriously consider purchases like this, and I just don't see them opting for something their phones already largely do -- phones which are required to use the ?Watch. So, no this won't be the iPhone launch, I'm not even sure it will do as well as the iPad launch. Maybe something akin to the Apple TV launch.

  • Reply 6 of 67
    mhiklmhikl Posts: 471member

    Estimates on Apple stock and projections are always low. Expect much higher results.

    What gives? Amazon and Google estimated high? It’s a conundrum.

    I wonder when MS drops back to its usual estimates, as it surely will, will Apple finally be taken seriously?

    N/C

    mhikl

  • Reply 7 of 67
    blastdoorblastdoor Posts: 1,931member
    Quote:

    Originally Posted by Mac_128 View Post

     

    This is not really a new product category. It is for Apple, but it's not quite the same as with mobile phones. The market is already saturated with smart-watches, and they aren't really catching on. So far, aside from fit and finish I haven't really seen Apple offering anything that the others aren't -- at least in terms of what the marketplace seems to be demanding. They're offering ?Pay, and that's about it (and that requires a current iPhone). I'm not even sure if the ?Watch is waterproof at this point. There's definitely going to be a small pool of early adopters who buy anything Apple offers, but unlike the iPhone, and the iPad, there just doesn't seem to be horde of consumers clamoring for something better in this category, at least not to pay a premium for it.

     

    I've no doubt that eventually as the ?Watch matures, and developers find indispensable ways to integrate it into our lives it might morph into another powerhouse product for Apple. But at the moment, they're really just one more entry into a crowded field for a product general consumers don't really seem to be demanding. The Rolex-wearing guy isn't going to toss it for an ?Watch. He might buy one as an option, but he's got the disposable income to do it. Most people have to seriously consider purchases like this, and I just don't see them opting for something their phones already largely do -- phones which are required to use the ?Watch. So, no this won't be the iPhone launch, I'm not even sure it will do as well as the iPad launch. Maybe something akin to the Apple TV launch.




    I think the sales of existing smart watches have as much predictive power for the apple watch as the use of google wallet had for apple pay -- which is to say, zero predictive power. The issue is that those other companies have very little brand credibility with consumers to introduce a new product category. People just don't pay attention to what Samsung, Asus, etc do in the way they pay attention to Apple. To the extent normal people are even aware of smart watches from other companies, I suspect they see them as just nerd toys for nerds. 

     

    Also, note that people underestimated iPad sales using almost exactly the same logic you're using here. Tablets had been available for 10 years prior to the iPad and had attracted virtually no interest.

     

    It's different when Apple does something. Brand credibility is an incredible asset. No other tech company comes close to Apple in this regard. Heck, there might not be any company regardless of product category that approaches Apple in this regard. Maybe Disney/Pixar. 

  • Reply 8 of 67
    512ke512ke Posts: 782member

    I don't think the Apple Watch will be upgradeable personally.  

     

    You can't really upgrade your Macbook any more, or your iPhone.  Apple's trend is to seal their gear shut so you can't change it.  The Apple Phone, I think, will be a disposable item: buy it ,use it, sell it, get a new one.  

  • Reply 9 of 67
    mac_128 wrote: »
    The market is already saturated with smart-watches, and they aren't really catching on.

    That's what they said about the smartphone in 2007, and even though Apple changed the game there were very competent and popular players for their time. There is no multibillion dollar smartwatch profits the way there were multibillion dollar smartphones in 2007. It's the very definition of a nascent market. If anything, I'd say Apple is getting into this market too early, not too late.
  • Reply 10 of 67
    512ke wrote: »
    I don't think the Apple Watch will be upgradeable personally.  

    You can't really upgrade your Macbook any more, or your iPhone.  Apple's trend is to seal their gear shut so you can't change it.  The Apple Phone, I think, will be a disposable item: buy it ,use it, sell it, get a new one.  

    You hypothesis may be proved true, but you can't apply the same rational of making a notebook PC than you will to a watch. Apple also doesn't make solid gold and leather MBPs but that is possible on the ?Watch. The only thing we know is that Apple alters their decisions PoV based on each market category, and jewelry is definitely a new category. Remember the iPhone and iPad? They didn't apply their notebook PC rational to designing them. They looked at that specific category fresh. If they didn't, then Palm's CEO would have been right about Pc guys not being able to come in and figure it out.
  • Reply 11 of 67
    Says investors underestimate Apple Watch... raises target $11 above current price.

    ... $9 under two other investment houses.

    Yeah -- Had to laugh at that!
  • Reply 12 of 67
    MacProMacPro Posts: 18,309member
    solipsismy wrote: »
    That's what they said about the smartphone in 2007, and even though Apple changed the game there were very competent and popular players for their time. There is no multibillion dollar smartwatch profits the way there were multibillion dollar smartphones in 2007. It's the very definition of a nascent market. If anything, I'd say Apple is getting into this market too early, not too late.

    I have a feeling Apple are timing it just right, that isn't to say it won't get a lot better YoY for some time to come, both in ecosystem support and technological advances.
  • Reply 13 of 67
    Quote:

    Originally Posted by Blastdoor View Post

     

    It's so hard to predict the success of a new product category like this. But I think this prediction makes a lot of sense, with one caveat. 

     

    When the iPhone came out I didn't buy one until the 3G became available. I just didn't think the initial iPhone was fully baked.

     

    When the iPad first came out I pre-ordered it. It was the first time I bought a new product category without being able to see it first hand. But to me that was easy to do -- I saw it as just a big iPod Touch, which seemed quite appealing at the time. 

     

    I think the key for me buying Apple Watch v 1.0 is if the S1 is upgradable. If it is, I'll very likely buy v 1.0, but I won't pre-order (I'll want to pick style/band in person). If the S1 can't be upgraded then it's not likely at all that I'll get v 1.0 unless battery life and performance are really, really good. 

     

    So I think the big caveat on whether the Watch does as well as she's projecting is the upgradability. Nobody is going to buy a watch -- particularly a several thousand dollar gold watch -- that is obsolete in a year or two. People have a different expectation for this class of device. I suspect Apple knows this, and certainly the form of the S1 screams upgradable. But I'll want confirmation that it's upgradable -- or that an upgrade isn't necessary because they've hit it out of the park with v 1.0 -- before I buy, and I suspect many others will be in the same boat. 




    Will the S1 processor in the Apple Watch be upgradeable? Is that a serious question? You are talking about the same company that solders RAM into the new Mac Mini.

     

    With that nonsense out the way, I think the watch will do well, but it won't do extremely well until battery life gets fixed and it's self sufficient. My fiance was excited about it until I told her an iPhone is required. When you can put on this watch and go work out and track your progress without having to drag along your iPhone, that's when they will be onto something really special.

  • Reply 14 of 67
    How can it fail with competition like this:


    [B][SIZE=4]Tread 2 Murder Watch by DEVON[/SIZE][/B]


    [IMG ALT=""]http://forums.appleinsider.com/content/type/61/id/52632/width/500/height/1000[/IMG]

    $10,950 USD


    http://fancy.com/things/541215148400970786/Tread-2-Murder-Watch-by-DEVON?ref=ffemail
  • Reply 15 of 67
    Quote:

    Originally Posted by SolipsismY View Post





    You hypothesis may be proved true, but you can't apply the same rational of making a notebook PC than you will to a watch. Apple also doesn't make solid gold and leather MBPs but that is possible on the ?Watch. The only thing we know is that Apple alters their decisions PoV based on each market category, and jewelry is definitely a new category. Remember the iPhone and iPad? They didn't apply their notebook PC rational to designing them. They looked at that specific category fresh. If they didn't, then Palm's CEO would have been right about Pc guys not being able to come in and figure it out.

    You may not be able to apply the same rational to notebook PC's, but you can certainly apply it to just Apple in general. When have you ever seen Apple make available upgradeable processors in any Mac, iPod, iPhone, or iPad in the past decade? The answer is never. The only time you could upgrade processors is when people would buy off the shelf Intel processors that had the same pin outs.

     

    Do people on this board really think Apple is going to be taking in Apple Watches at the Genius Bar to get your processor upgraded? That's crazy talk right there if you ask me.

  • Reply 16 of 67
    rogifanrogifan Posts: 10,669member
    From MG Siegler:

    https://medium.com/five-hundred-words/a-few-thoughts-on-watchkit-and-the-initial-apple-watch-79b6448957c7

    But, from what I’m hearing, the Apple Watch itself will require quite a bit more testing and tweaking before it’s ready to launch to the public. Reports have thrown out a timetable at or around Valentine’s Day for a launch. That may be optimistic given the holidays (again, this is not Steve Jobs’ Apple anymore). That’s less than three months away with vacation time eating into the workload as well. I’d bet on something closer to March/April (which isn’t really based on much more than me looking at a calendar).

    The flip side of all this is that those who have seen the Apple Watch so far seem to be very impressed. That early talk is that it really may lead to a whole new ecosystem of apps. Again, perhaps not with the v1 “widgets” but more down the road. If your smartphone is the most personal computer you have on you, this watch is about to take that to the next level, it seems.
  • Reply 17 of 67
    Initial sales will be good, first quarter sales, after which sales will stagger unless we see the watch subsidized in countries like the US, UK and Japan. Without subsidies, this will be an epic failure. With subsidies, it could be a huge success.
  • Reply 18 of 67
    Quote:

    Originally Posted by XuSIA View Post



    Initial sales will be good, first quarter sales, after which sales will stagger unless we see the watch subsidized in countries like the US, UK and Japan. Without subsidies, this will be an epic failure. With subsidies, it could be a huge success.



    Subsidies on a watch? Who would subsidize it, doesn't make any sense. The iPad has been successful without subsidies, don't see why the Watch will be any different.

  • Reply 19 of 67
    rogifanrogifan Posts: 10,669member
    You may not be able to apply the same rational to notebook PC's, but you can certainly apply it to just Apple in general. When have you ever seen Apple make available upgradeable processors in any Mac, iPod, iPhone, or iPad in the past decade? The answer is never. The only time you could upgrade processors is when people would buy off the shelf Intel processors that had the same pin outs.

    Do people on this board really think Apple is going to be taking in Apple Watches at the Genius Bar to get your processor upgraded? That's crazy talk right there if you ask me.

    The most upgradable Mac is also the most expensive. I have a really hard time believing Apple will charge several thousands of dollars for a watch and expect you to upgrade it ever year or two.
  • Reply 20 of 67
    You may not be able to apply the same rational to notebook PC's, but you can certainly apply it to just Apple in general.

    Again, you can't use the rational for a notebook PC that you would for a piece of jewelry. You you don't see how jewelry is different from a PC then I don't know what to tell you, except that you need to change your PoV.
    When have you ever seen Apple make available upgradeable processors in any Mac, iPod, iPhone, or iPad in the past decade? The answer is never.

    That's false. It's been possible on a Mac for most, if not all of it's lifespan. It's possible right now.
    The only time you could upgrade processors is when people would buy off the shelf Intel processors that had the same pin outs.

    We're not talking about a processor, we're talking an entire system that has been compartmentalized and branded. This is also something Apple has never done before. The S-series "computer on a chip" is not the same as taking about the A-series chip in their iDevices.
    Do people on this board really think Apple is going to be taking in Apple Watches at the Genius Bar to get your processor upgraded? That's crazy talk right there if you ask me.

    That does seem ridiculous, but so does spending $5k on a piece of jewelry that acts as a peripheral device for an iPhone, especially one that has a branded S-series SIP that's been branded.
Sign In or Register to comment.