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· Morgan Stanley has not considered Apple’s upcoming products, like AR/VR headset in
raising the price projection
· Katy
Huberty increased the iPhone shipment forecast by 3 million units to 83 million
units for the December quarter
Morgan Stanley on Tuesday raised Apple Inc’s price target from $164 to $200 and maintained the equivalent of a buy rating but mentioned that the new expected products from the company like an augmented reality headset or self-driving car aren’t taken into consideration.
Shares of Apple jumped 3.75% to $171.58 on the New York
trading session, reaching a new all-time high.
Katy Huberty, the MS analyst, also increased the iPhone
shipment forecast by 3 million units to 83 million units, an increase of about 4%
year-over-year for the December quarter.
In a note to investors, she said the Cupertino giant hasn’t
hit the same supply constraints for this quarter, which it faced in the previous
quarter. She also expects App Store revenue to outperform its initial
forecasts.
“Today, we know that Apple is working on products to address
two significantly large markets – AR/VR and Autonomous Vehicles – and as we get
closer to these products becoming a reality, we believe valuation would need to
reflect the optionality of these future opportunities,” Huberty said in the
note.
Apple’s revenue growth
The note argues that Apple’s stock price has increased nearly
500% over the last five years, primarily due to new products and services
earnings, not from iPhone revenue.
While Apple’s revenue from its iPhone has grown 40% since
2016, about 6% of the total revenue over the same period has been generated by
new products like AirPods, Apple Watch and some of Apple’s services, which
didn’t exist five years ago.
The services business has grown to nearly $70 billion
annually, and the wearables and accessories business adds $38 billion annually
to Apple’s revenue, Huberty said.
The Morgan Stanley analyst expects new upcoming products like
an AR headset could contribute as much revenue over five years of launch to
Apple as the iPad did in its first four years on the market.
The growth will be an increase of around $20 per share in
Apple’s current share price, on top of Morgan Stanley’s existing growth projections.
Picture Credit: NY Times