Morgan Stanley trims AAPL target to $298 as hopes for sharp consumer recovery dampen

Posted:
in AAPL Investors edited September 2020
Morgan Stanley said Friday it is reducing expectations for Apple through fiscal 2021 to better align with the bank's macro view that GDP growth will take a greater hit than previously expected, due largely to a prolonged consumer recovery.

Apple's 2020 MacBook Air will be crucial to Apple's financial recovery, says Morgan Stanley
Apple's 2020 MacBook Air will be crucial to Apple's financial recovery, says Morgan Stanley


In a note to investors seen by AppleInsider, Morgan Stanley analyst Katy Huberty said she believes that Apple will "continue to outperform peers" in a challenging market and is "best positioned" to recover business performance to previously existing levels.

But the company faces a variety of short term challenges due to weaker consumer demand across the board, and was recently forced to extend its Apple retail store closures till at least May.

While Huberty believes that global retail foot traffic could resume in May, she expects it to remain at 50% of historical levels through the end of August. This would theoretically improve to 70% in the September quarter, and up to 85% through the end of the holiday 2020 season. Some of the lost sales are expected to shift online, but analyst assumes that Apple will inevitably only capture about 30% of them.

Citing a recent analysis by Morgan Stanley's economic team, Huberty said her latest estimates better align with emerging expectations that GDP growth in both the US and China will be lower than previously forecast, given a slower-than-predicted coronavirus curve-flattening across the world. The impact on Apple's bottom line will be compounded by three factors related to the GDP contraction.

First, North American retail traffic is expected to remain "lower for longer," which Huberty and her firm expect to drop by over 95% year-over-year through the end of May. Additionally, customers surveyed suggest that just 22% of consumers indicate that they are likely to upgrade their smartphone in the next six months, versus 53% that expected to do so in the year-ago quarter.

Smartphone purchase intent surveys, performed between 2018 and 2020 - source Morgan Stanley
Smartphone purchase intent surveys, performed between 2018 and 2020 - source Morgan Stanley


And third -- perhaps the most problematic for Apple -- is Morgan Stanley's view that the world could see a further extension of smartphone upgrade cycles; partly as a result of the coronavirus pandemic, and partially from other factors. In this scenario, the iPhone replacement cycle could periodicity become about the same as the current PC market, she said, which is roughly one upgrade every 4.3 years.

As such, Huberty is now forecasting 181 million iPhone shipments in Apple's fiscal year 2020, which ends in September. The replacement cycle is predicted to shorten a bit to 3.9 years for fiscal year 2021 with the advent of the 5G "iPhone 12," which the analyst sees fueling 207 million iPhone shipments. Those figures are a revision down from Huberty's previous estimates of 192 million and 224 million, respectively.

In the meantime, Morgan Stanley expects Apple to continue to pay employees during the store shutdown while remaining heavily invested in research and development.

5G "iPhone 12" may ship later than expected, but still in 2020

Huberty also noted that there has been substantial supply chain chatter recently, specifically in regards to production of the "iPhone 12." She doesn't see the reports as inaccurate, but as more of a "catchup with expectations" and Apple adjusting production quantities in response to the economic condition.

While she predicts that the "iPhone 12" will ship in 2020, she also believes that it could arrive a bit later than September, with a ship date closer to that of the iPhone X in November, versus the September shipment of the iPhone 11 Pro.

Apple services, its balance sheet, and the App Store are positives

Huberty also said she expects a 20.6% revenue increase from the App Store through the end of February, ahead of previous predictions, thanks largely to global "stay at home" orders. Through March 29, revenue growth is estimated to be above 15% year-over-year, also an improvement. Other net positives for Apple include a "global uptick" for Apple TV+ in recent weeks, demand for laptops because of work from home installs, and 5G smartphone demand in China.

Apple product category revenue growth in 2020 and 2021 - credit Morgan Stanley
Apple product category revenue growth in 2020 and 2021 - credit Morgan Stanley


Cited factors that will contribute to Apple's recovery are Apple's leading customer retention rates, and a balance sheet that will allow Apple to invest disproportionately to its competitors even in a long market downturn. Huberty says she believes that Apple will continue its stock repurchase effort, and will buy back $20 billion of shares quarterly.

Weighing the current positives and negatives, Huberty trimmed her target price on shares of Apple to $298 from $328. Her new estimate is based on a 3.2 estimated value/sales multiple on mature hardware like the iPhone, iPad, and Mac; a 4.2 EV/sales multiple on wearables, home, and accessories (including the Apple Watch and AirPods), and a 6.9x EV/sales multiple on Apple's services. Overall, this resolves into a 4.1x target EV/sales multiple, and a 19.9 target profit to earnings multiple.

Shares of Apple were trading down 1.1% (or $2.30) to $242.63 per share Friday morning on above-average trading volumes. As a whole, the NASDAQ was also lagging, down roughly 1.1%.

Comments

  • Reply 1 of 16
    XedXed Posts: 820member
    I know I don't plan to upgrade my iPhone 11 for at least a couple years. 5G won't change that, but it's possible some other feature might. I do plan to buy AirTags but I don't them right away since all my travel plans have been killed and it doesn't look like I'll be going anywhere for a long time now due to the virus. A new MacBook Pro would be great, but it would have to be a major upgrade, like DDR4 RAM, WiFI6, and/or mini-LED display. I'd like one that is ARM, but I don't think Pro Macs will get that option for several years.
    minicoffee
  • Reply 2 of 16
    SpamSandwichSpamSandwich Posts: 33,408member
    $298 would be terrific right about now.
    yojimbo007
  • Reply 3 of 16
    lkrupplkrupp Posts: 8,999member
    We’re going through this pandemic now but after it’s over we’ll be dealing with a decimated economy for a decade that will make the Great Depression look like a minor slowdown. And the government will use it as an excuse to grant even more power to itself in the name of ‘saving’ us. You don't have to be paranoid to know that there’s a think tank somewhere right now taking notes on how this goes down, how easy it is to instill fear and panic in the population with the objective of controlling them. 

    Just read a report about a Kentucky county ordering Coronavirus patients to wear GPS ankle bracelets so they can be tracked.
  • Reply 4 of 16
    XedXed Posts: 820member
    lkrupp said:
    We’re going through this pandemic now but after it’s over we’ll be dealing with a decimated economy for a decade that will make the Great Depression look like a minor slowdown. And the government will use it as an excuse to grant even more power to itself in the name of ‘saving’ us. You don't have to be paranoid to know that there’s a think tank somewhere right now taking notes on how this goes down, how easy it is to instill fear and panic in the population with the objective of controlling them. 

    Just read a report about a Kentucky county ordering Coronavirus patients to wear GPS ankle bracelets so they can be tracked.
    I'm concerned by your issues of tracking people who are highly contagious but too arrogant and ignorant to stay home with a conspiracy of the gov't using this to get everyone tracked with ankle bracelets. What Jefferson County, Kentucky is doing should warrant commendation, not condemnation, for dealing with dangerous people without threatening to lock them away in a room when they're actively hurting society.
    edited April 2020 minicoffeechemengin1jony0
  • Reply 5 of 16
    apple ][apple ][ Posts: 9,233member
    lkrupp said:
    Just read a report about a Kentucky county ordering Coronavirus patients to wear GPS ankle bracelets so they can be tracked.
    I don't have a problem with that. People can not be trusted.

    If anybody is confirmed to have the virus and they are breaking a quarantine, then I am actually ok with them being shot to be honest.

    They are carrying a deadly virus and if they do not adhere to the common sense rules of isolating and staying at home for example, then they should be taken out if they are foolish enough to violate common sense measures in order to protect the public.

    We need to end this virus crap, so that things can get back to normal. This virus crap is killing the entire economy.
    edited April 2020 chemengin1jony0
  • Reply 6 of 16
    lkrupplkrupp Posts: 8,999member
    Xed said:
    lkrupp said:
    We’re going through this pandemic now but after it’s over we’ll be dealing with a decimated economy for a decade that will make the Great Depression look like a minor slowdown. And the government will use it as an excuse to grant even more power to itself in the name of ‘saving’ us. You don't have to be paranoid to know that there’s a think tank somewhere right now taking notes on how this goes down, how easy it is to instill fear and panic in the population with the objective of controlling them. 

    Just read a report about a Kentucky county ordering Coronavirus patients to wear GPS ankle bracelets so they can be tracked.
    I'm concerned by your issues of tracking people who are highly contagious but too arrogant and ignorant to stay home with a conspiracy of the gov't using this to get everyone tracked with ankle bracelets. What Jefferson County, Kentucky is doing should warrant commendation, not condemnation, for dealing with dangerous people without threatening to lock them away in a room when they're actively hurting society.
    So I guess you would also be okay with sending cops into a church to arrest all the congregants for violating the stay-at-home-order? Isn’t it amazing what the government can do after declaring an emergency? The Constitution goes out the window as well as the first and second amendments. All for the ‘good’ of society of course. 
  • Reply 7 of 16
    apple ][apple ][ Posts: 9,233member
    lkrupp said:
    So I guess you would also be okay with sending cops into a church to arrest all the congregants for violating the stay-at-home-order? Isn’t it amazing what the government can do after declaring an emergency? The Constitution goes out the window as well as the first and second amendments. All for the ‘good’ of society of course. 
    Church. Synagogue, Mosque etc. Arrest them all IMO.

    Religion does not give anybody an excuse to practice deadly stupidity.

    I have read about multiple places where there have been large religious gatherings of people coming together to pray in close proximity to each other. That is plain stupidity and is also dangerous, not just to themselves, but to others. If they want to go to a deserted island and infect themselves, then they are free to do so, but they are not free to do so in a civilized society when there is a current pandemic taking place.

    I am all about facts and science, and no religion trumps science.

    We know that this is a virus and we know that it is very contagious, so large gatherings of people is an incredibly stupid idea right now and anybody attempting to practice such stupidity at this time should face the full consequences of their potential deadly actions.

    As I stated above, we need to end this virus crap as quickly as possible, so that we can get back to normal. Having ignorant nutjobs running around doing what they please is not helping to end the virus situation.


    edited April 2020 MacProchemengin1jony0
  • Reply 8 of 16
    XedXed Posts: 820member
    lkrupp said:
    Xed said:
    lkrupp said:
    We’re going through this pandemic now but after it’s over we’ll be dealing with a decimated economy for a decade that will make the Great Depression look like a minor slowdown. And the government will use it as an excuse to grant even more power to itself in the name of ‘saving’ us. You don't have to be paranoid to know that there’s a think tank somewhere right now taking notes on how this goes down, how easy it is to instill fear and panic in the population with the objective of controlling them. 

    Just read a report about a Kentucky county ordering Coronavirus patients to wear GPS ankle bracelets so they can be tracked.
    I'm concerned by your issues of tracking people who are highly contagious but too arrogant and ignorant to stay home with a conspiracy of the gov't using this to get everyone tracked with ankle bracelets. What Jefferson County, Kentucky is doing should warrant commendation, not condemnation, for dealing with dangerous people without threatening to lock them away in a room when they're actively hurting society.
    So I guess you would also be okay with sending cops into a church to arrest all the congregants for violating the stay-at-home-order? Isn’t it amazing what the government can do after declaring an emergency? The Constitution goes out the window as well as the first and second amendments. All for the ‘good’ of society of course. 
    Of course. Entitled people who think the rules don't apply to them hurt society. I am curious where in the Constitution it says anything about churches having uncurbed access to hold in-person meetings even if it causes death, destruction, and financial chaos for society. I don't recall that anywhere.
    minicoffeechemengin1jony0
  • Reply 9 of 16
    yojimbo007yojimbo007 Posts: 1,124member
    $298 would be terrific right about now.
    Ditto .  Noting to sneeze at! 
  • Reply 10 of 16
    yojimbo007yojimbo007 Posts: 1,124member

    lkrupp said:
    We’re going through this pandemic now but after it’s over we’ll be dealing with a decimated economy for a decade that will make the Great Depression look like a minor slowdown. And the government will use it as an excuse to grant even more power to itself in the name of ‘saving’ us. You don't have to be paranoid to know that there’s a think tank somewhere right now taking notes on how this goes down, how easy it is to instill fear and panic in the population with the objective of controlling them. 

    Just read a report about a Kentucky county ordering Coronavirus patients to wear GPS ankle bracelets so they can be tracked.
    No i dont have to be PARANOID.. but u sir are over the the top Paranoid ! 
    chemengin1
  • Reply 11 of 16
    yojimbo007yojimbo007 Posts: 1,124member

    apple ][ said:
    lkrupp said:
    Just read a report about a Kentucky county ordering Coronavirus patients to wear GPS ankle bracelets so they can be tracked.
    I don't have a problem with that. People can not be trusted.

    If anybody is confirmed to have the virus and they are breaking a quarantine, then I am actually ok with them being shot to be honest.

    They are carrying a deadly virus and if they do not adhere to the common sense rules of isolating and staying at home for example, then they should be taken out if they are foolish enough to violate common sense measures in order to protect the public.

    We need to end this virus crap, so that things can get back to normal. This virus crap is killing the entire economy.
    Wow... how many people should get shot because of the flue ? Which has killed 10 times more in the same exact time frame.
    So many  People  have lost complete perspective thanks to media's over the top fear mongering....

    Everyday  you get in your car and  drive u are 10 times more likely to die than from this virus at its present state..  

    In about a year there will be a vaccine.   So chill.. and stop the fear mongering.. thats the real killer of the economy! Over the top fear mongering rather than being objective and reasonable !.

    re vaccine.. did u have  your flue shot last year? Flue killed 500k people globally last season!...   if u did not u should get  shot right!
    Most don't get the flue shot .. some even heavily advocate against it... lets shoot them all.  Yee haaa 

    Get a perspective !. 

    edited April 2020
  • Reply 12 of 16
    apple ][apple ][ Posts: 9,233member

    apple ][ said:
    lkrupp said:
    Just read a report about a Kentucky county ordering Coronavirus patients to wear GPS ankle bracelets so they can be tracked.
    I don't have a problem with that. People can not be trusted.

    If anybody is confirmed to have the virus and they are breaking a quarantine, then I am actually ok with them being shot to be honest.

    They are carrying a deadly virus and if they do not adhere to the common sense rules of isolating and staying at home for example, then they should be taken out if they are foolish enough to violate common sense measures in order to protect the public.

    We need to end this virus crap, so that things can get back to normal. This virus crap is killing the entire economy.
    Wow... how many people should get shot because of the flue ? Which has killed 10 times more in the same exact time frame.
    So many  People  have lost complete perspective thanks to media's over the top fear mongering....

    Everyday  you get in your car and  drive u are 10 times more likely to die than from this virus at its present state..  

    In about a year there will be a vaccine.   So chill.. and stop the fear mongering.. thats the real killer of the economy! Over the top fear mongering rather than being objective and reasonable !.

    re vaccine.. did u have  your flue shot last year? Flue killed 500k people globally last season!...   if u did not u should get  shot right!
    Most don't get the flue shot .. some even heavily advocate against it... lets shoot them all.  Yee haaa 

    Get a perspective !. 

    I haven't watched the news in years, not mainstream tv news and not cable tv news either, so I'm not affected by their hyperbole and fear mongering. I do of course check the news on various sites on the net each day and I am very well informed as to what's going on.

    And yes, I did get a flu shot last year, as I have done for a number of years now. It only takes a few minutes and who wants to get the flu?

    As for the current virus, I just returned from grocery shopping a little while ago and they're making people line up outside the store before they can enter, so that there is not too many customers in the store at one time. I stood in the rain for 10 minutes, and then I was able to finally enter the store.

    I don't recall them doing that in the past ever, so these are special circumstances.

    And I have zero tolerance for morons and fools who are willingly going around if they have been diagnosed as infected and they have been ordered to quarantine and they are now violating that and willingly infecting others. 

    I was playing World War Z the other day, and I view those people just like zombies in that game and I have no problem with them being dealt with harshly.

    I am tired of this whole virus situation already, and I have no patience for those whose actions are likely to prolong the situation. The sooner things get back to normal, the better.
    chemengin1jony0
  • Reply 13 of 16
    Apple is getting the biggest price target cuts of all the major tech companies. Business as usual for Apple when things start going downhill. Too much exposure to China has left Apple the tech epicenter of the Coronavirus. Wall Street believes almost no consumers will be buying iPhones but they will be buying Teslas. That is really hard to understand considering the massive price differential. I would think people would stick with their ICE cars now that gasoline is quite inexpensive.
  • Reply 14 of 16
    MacProMacPro Posts: 19,251member
    apple ][ said:
    lkrupp said:
    So I guess you would also be okay with sending cops into a church to arrest all the congregants for violating the stay-at-home-order? Isn’t it amazing what the government can do after declaring an emergency? The Constitution goes out the window as well as the first and second amendments. All for the ‘good’ of society of course. 
    Church. Synagogue, Mosque etc. Arrest them all IMO.

    Religion does not give anybody an excuse to practice deadly stupidity.

    I have read about multiple places where there have been large religious gatherings of people coming together to pray in close proximity to each other. That is plain stupidity and is also dangerous, not just to themselves, but to others. If they want to go to a deserted island and infect themselves, then they are free to do so, but they are not free to do so in a civilized society when there is a current pandemic taking place.

    I am all about facts and science, and no religion trumps science.

    We know that this is a virus and we know that it is very contagious, so large gatherings of people is an incredibly stupid idea right now and anybody attempting to practice such stupidity at this time should face the full consequences of their potential deadly actions.

    As I stated above, we need to end this virus crap as quickly as possible, so that we can get back to normal. Having ignorant nutjobs running around doing what they please is not helping to end the virus situation.


    What you said!
  • Reply 15 of 16
    slurpyslurpy Posts: 5,309member
    lkrupp said:
    Xed said:
    lkrupp said:
    We’re going through this pandemic now but after it’s over we’ll be dealing with a decimated economy for a decade that will make the Great Depression look like a minor slowdown. And the government will use it as an excuse to grant even more power to itself in the name of ‘saving’ us. You don't have to be paranoid to know that there’s a think tank somewhere right now taking notes on how this goes down, how easy it is to instill fear and panic in the population with the objective of controlling them. 

    Just read a report about a Kentucky county ordering Coronavirus patients to wear GPS ankle bracelets so they can be tracked.
    I'm concerned by your issues of tracking people who are highly contagious but too arrogant and ignorant to stay home with a conspiracy of the gov't using this to get everyone tracked with ankle bracelets. What Jefferson County, Kentucky is doing should warrant commendation, not condemnation, for dealing with dangerous people without threatening to lock them away in a room when they're actively hurting society.
    So I guess you would also be okay with sending cops into a church to arrest all the congregants for violating the stay-at-home-order? Isn’t it amazing what the government can do after declaring an emergency? The Constitution goes out the window as well as the first and second amendments. All for the ‘good’ of society of course. 
    I am 100% ok with coronavirus patients wearing GPS ankle bracelets (myself included), and 100% ok with arresting congregants in any place of worship if there's a lockdown order in place (myself included). I'm the last person in favor of giving the government oppressive power, but since many people are too fucking stupid and too selfish to act in a manner that would not cause great harm to others, I'm fine with temporary measures meant to decrease the chances of this harm.

    Anyone gathering in a church/mosque/synagogue today is a selfish PoS and exhibits criminal danger to others.  So many outbreaks are being traced back to such congregations. So yes, these assholes can all be arrested for all I care, as lives will be saved. People get arrested for a LOT less.

    And if you're NOT ok with measures to deter people who you know are infected from going out, I don't know what to tell you. 
    edited April 2020 jony0
  • Reply 16 of 16
    XedXed Posts: 820member
    slurpy said:
    lkrupp said:
    Xed said:
    lkrupp said:
    We’re going through this pandemic now but after it’s over we’ll be dealing with a decimated economy for a decade that will make the Great Depression look like a minor slowdown. And the government will use it as an excuse to grant even more power to itself in the name of ‘saving’ us. You don't have to be paranoid to know that there’s a think tank somewhere right now taking notes on how this goes down, how easy it is to instill fear and panic in the population with the objective of controlling them. 

    Just read a report about a Kentucky county ordering Coronavirus patients to wear GPS ankle bracelets so they can be tracked.
    I'm concerned by your issues of tracking people who are highly contagious but too arrogant and ignorant to stay home with a conspiracy of the gov't using this to get everyone tracked with ankle bracelets. What Jefferson County, Kentucky is doing should warrant commendation, not condemnation, for dealing with dangerous people without threatening to lock them away in a room when they're actively hurting society.
    So I guess you would also be okay with sending cops into a church to arrest all the congregants for violating the stay-at-home-order? Isn’t it amazing what the government can do after declaring an emergency? The Constitution goes out the window as well as the first and second amendments. All for the ‘good’ of society of course. 
    I am 100% ok with coronavirus patients wearing GPS ankle bracelets (myself included), and 100% ok with arresting congregants in any place of worship if there's a lockdown order in place (myself included). I'm the last person in favor of giving the government oppressive power, but since many people are too fucking stupid and too selfish to act in a manner that would not cause great harm to others, I'm fine with temporary measures meant to decrease the chances of this harm.

    Anyone gathering in a church/mosque/synagogue today is a selfish PoS and exhibits criminal danger to others.  So many outbreaks are being traced back to such congregations. So yes, these assholes can all be arrested for all I care, as lives will be saved. People get arrested for a LOT less.

    And if you're NOT ok with measures to deter people who you know are infected from going out, I don't know what to tell you. 
    People that attend their church in person tomorrow because they believe their god will protect them from nature need to refer to it as Face Palm Sunday.
    jony0
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