Morgan Stanley lowers Sept. iPhones, raises Apple target

From a note to clients by Morgan Stanley Apple analyst Katy Huberty that landed in my inbox Sunday:

Increasing evidence OLED iPhone launches in October, rather than September. In light of the most meaningful feature and technology upgrades in iPhone’s history – including OLED displays, wireless charging, and 3D sensors for AR – we believe it’s reasonable to assume the new, higher priced OLED iPhone ships in October rather than September. This is consistent with supplier checks by the Morgan Stanley Greater China Technology Hardware team, led by Sharon Shih, as published in the July Monthly Databook. Our view of demand over the course of the next iPhone cycle is unchanged with the 6M lower September shipments now incorporated in our FY18 iPhone forecast of 266M (up from 260M) which aligns with our recent bottom-up analysis of upgrades, retention rate, and switchers by region.

Look through September guidance to even stronger FY18 growth. We expect Apple to report an in-line June quarter and provide a weaker than consensus September outlook on the back of a slightly later iPhone launch than typical (October shipment launch instead of September). The delay drives our FY18 estimates higher and creates a dynamic of much better than normal December and March quarter seasonality, providing an attractive set-up for the stock as we move past the September guide. While our September quarter Revenue and EPS is 12% and 20% below consensus, our revised FY18 estimates are 13% and 11% above consensus.

Maintain Overweight and raise price target to $182 from $177.

Note: Huberty came in 11th out of 27 in last quarter’s Earnings Smackdown. See Best and worst Apple analysts, Q2 2017 edition

2 Comments

  1. Robert Paul Leitao said:

    With the FY2018 iPhone super cycle coming into view, Apple’s September quarter guidance is essentially irrelevant. Good to see Morgan Stanley raising its price target to $182. The firm’s bullish stance on strong iPhone demand, particularly in the upcoming December and March quarters, warrants the higher price target.

    Although Apple has performed well in the first half of CY2017, management continues to repurchase shares on the cheap.

    4
    July 17, 2017
  2. Gianfranco Pedron said:

    While we may all expect Apple to announce refreshed and updated iPhones “on schedule”, if the past is indicative of the future, the “flagship 10th anniversary” device should be allowed to, and probably should, follow a different timeline.

    Many “financial media personalit[ies]” are intent on predicting doom and gloom for Apple based on the possible “late” arrival of a device which, outside of Apple, only exists as a rumor, as if rumors have to materialize according to “the street’s” calendar lest Apple fall into oblivion.

    It seems to me things are getting so bad out there that I might really consider wearing hip waders and rubber gloves to navigate the internet trying to find meaningful information about Apple, if only they weren’t so uncomfortable while sitting at a desk.

    Kudos to Katy for seeing past the BS and raising her price target.

    0
    July 17, 2017

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