Morgan Stanley lowers Apple price target to $195 on Covid disruptions
Katy Huberty of Morgan Stanley has lowered her Apple price target to $195 from $210 because of tough economic conditions in the June quarter, but says Apple still remains a top pick for 2022.
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In a note to investors seen by AppleInsider, Huberty points out that Apple's March quarter results were better than anticipated. However, her June quarter revenue forecast fell by 3% as a result of Covid-driven supply constraints.
The key, however, is that Apple's constraints are driven by supply and not demand. In fact, Huberty says that Apple's demand is notably stable.
While the March quarter was yet another "clean" fiscal period for Apple and the company's June quarter commentary was "notably more positive," Apple is still facing headwinds from foreign exchange, a sales ban in Russia, and a resurgence of Covid-19 in key Chinese manufacturing cities.
As such, Huberty has trimmed her quarterly revenue forecast for Q3 2022 to $81.1 billion, down from $83.3 billion.
Despite the impact from Covid lockdowns and a small slowdown in the European market because of the Russia sales ban, Huberty believes that the the underlying health of Apple's product and services ecosystem is "remarkably stable."
"While management struck a more cautious tone given the uncertainty of COVID lockdowns in China and continued supply shortages, underlying demand commentary was more constructive, and we believe that an easing of COVID restrictions in China could drive upside to our new June quarter forecast," Huberty writes. "In a market beset by numerous challenges, Apple remains a beacon of stability, and we continue to see Apple as our Top IT Hardware Pick for 2022."
The analyst's new price target of $195, down from $210, is based on an implied price-to-earnings multiple of 30.3x on a new 2023 earnings-per-share estimate of $6.43.
Huberty's comments, like those from JP Morgan, come after Apple's reporting of a financial record-breaking March quarter.
Read on AppleInsider
Mac Studio
In a note to investors seen by AppleInsider, Huberty points out that Apple's March quarter results were better than anticipated. However, her June quarter revenue forecast fell by 3% as a result of Covid-driven supply constraints.
The key, however, is that Apple's constraints are driven by supply and not demand. In fact, Huberty says that Apple's demand is notably stable.
While the March quarter was yet another "clean" fiscal period for Apple and the company's June quarter commentary was "notably more positive," Apple is still facing headwinds from foreign exchange, a sales ban in Russia, and a resurgence of Covid-19 in key Chinese manufacturing cities.
As such, Huberty has trimmed her quarterly revenue forecast for Q3 2022 to $81.1 billion, down from $83.3 billion.
Despite the impact from Covid lockdowns and a small slowdown in the European market because of the Russia sales ban, Huberty believes that the the underlying health of Apple's product and services ecosystem is "remarkably stable."
"While management struck a more cautious tone given the uncertainty of COVID lockdowns in China and continued supply shortages, underlying demand commentary was more constructive, and we believe that an easing of COVID restrictions in China could drive upside to our new June quarter forecast," Huberty writes. "In a market beset by numerous challenges, Apple remains a beacon of stability, and we continue to see Apple as our Top IT Hardware Pick for 2022."
The analyst's new price target of $195, down from $210, is based on an implied price-to-earnings multiple of 30.3x on a new 2023 earnings-per-share estimate of $6.43.
Huberty's comments, like those from JP Morgan, come after Apple's reporting of a financial record-breaking March quarter.
Read on AppleInsider
Comments
Here's the better way to think about stock buying...
Never follow stock advice from somebody in the AppleInsider forums.
Be smart. Follow your heart.
"Buy good and hold" is not bad advice at all. By "good," the assumption is you've done your homework. Buying AAPL in 1999 was a pure risk play. If it wasn't an outsized portion of your portfolio, there was nothing wrong with chasing risk. That you held it for so many years because you "liked" the company is not causal—it could just have easily turned out very badly. Risk is risk, whether you love the source of it or not.
My point was not that AAPL or any stock should be viewed only through a negative lens. The point is that we make decisions with our investments based on a knowledge, not feelings.
For example, many years ago, I checked out the stock holdings of the big boys like Warren Buffet and Bill Gates to see if there were stocks common to their portfolios. My thinking was, these guys either know what they are doing or pay people to help them choose stocks, so by following their lead, I might be able to pick some winners. I found one stock named Waste Management (WM) in their portfolios that I decided to take a chance on. The name along didn't sound very appealing but I decided to buy $1,000 to see what would happen. Through the years, it's proved to be one of the better stocks I've picked outside Apple. But if I were to say if I picked it solely on knowledge and not on an emotional gut feeling, then I probably would be wrong. But how much emotion was involved in the purchase is hard to quantify. Ultimately, I followed my heart about the purchase, and that was really the point of my previous post.
I am not one to analyze all the boring details about a company or stock. I'll do a little research, but in the end, the buying decision involves my emotions too.
Economics looks tough the next few month at least. As long as China insists on Zero-Covid the manufacturing industry is challenged (and the last few weeks have been particularly bad). That - obviously no longer viable - zero Covid approach in China is likely to last through fall (as long as Xi Jinping hasn't 'won' his reelection on the 20th National Congress). So it's likely to get worse before it gets better. (Plus the additional risk of a russian war beyond the Ukrainian borders).
If you need money in the next 12 months, it's likely bad timing to sell stocks. If all goes well it'll look much better next year.
AppleInsider and many of the other Mac sites telegraphed Apple moves to their own desktop CPU’s years ago, most of the financial and PC sites as usual were clueless, long but not as long as 1999. That info made it easy to stay long.