Morgan Stanley raises Apple target $14 to $340

App Store revenue has been growing nearly twice as fast as analyst Katy Huberty expected.

From a note to clients that landed on my desktop early Wednesday:

Over the last 4 months the COVID-19 related shelter-in-place/quarantine measures have been a tailwind to the app economy, as consumers have been forced to spend more time than usual inside their home, driving an acceleration in App Store download and net revenue growth.

Last month, we predicted that April would mark the peak in App Store growth as countries began easing lockdown restrictions, allowing consumers to resume activities outside of the home. However, high levels of engagement have sustained as the “new normal” (at least in the near-to-medium-term) includes more time spent indoors, which should remain a tailwind to App Store performance, and which is now incorporated in our raised Services estimates.

App Store net revenue grew 35% Y/Y QTD through May, ahead of our +18% Y/Y June Q forecast. Even assuming growth slows in the month of June, we see over $500M of Services revenue upside

Maintains Overweight rating, raises price target to $340 from $326.

A couple charts:

huberty apple price target 340

huberty apple price target 340

My take: Huberty’s bull and bear cases are always worth watching. See below:

huberty apple price target 340

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