Better-than-expected iPhone 7 sales, she says, are already priced into the stock.
Morgan Stanley’s Katy Huberty has added her voice to the chorus of analysts reacting to the iPhone 7’s strong sales (see here) and the Samsung Galaxy Note 7’s melt-down (here). In a note to clients Friday, Huberty modestly increased her iPhone estimates for fiscal 2016 Q4 (to 44 million from 43 million) and 2017 Q1 (74 million from 72 million) and nudged her 12-month price target up $1 (to $124 from $123).
But that’s old news, she says, largely priced into the stock’s current price.
Not priced into the shares is her so-called bull case. “We’re increasingly confident,” she writes, “in the upcoming iPhone supercycle driving meaningful estimate revisions and the stock towards our $162 bull case.”
Huberty has long offered a “bull” and “bear case” to go with her official “base case,” but she rarely point to either with any conviction.
Click to enlarge. Not seeing the graphics? Try the website.
This time is different, thanks to what she calls the coming iPhone supercycle—a combination of pent-up demand from weak sales of the last iPhone and growing interest in the next one—the 10th anniversary edition. Huberty has been banging the drum for the supercycle since June, and other Apple analysts are starting to pick up the theme. See here.
If Huberty’s estimates carry a little more weight than the rest of the pack, it’s in part on the strength of Morgan Stanley’s proprietary AlphaWise surveys. These are Google Trends searches adjusted for global sales estimates by fine tuning the search criteria in each country.
How accurate are AlphaWise’s iPhone shipment estimates? Here’s the five-year track record:
Click to enlarge.
I’ve seen worse. Much worse.