Morgan Stanley raises Apple target $8 to $144

Analyst Katy Huberty's new bull case target is $201. Her bear case $77.

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

Our $144 price target is sum-of-the-parts driven. We apply a 5.5x EV/Sales multiple on Apple's Product business (iPhone, iPad, Mac, and Wearables) and a 13.6x EV/Sales multiple on Apple's Services business, in-line with their respective peer groups. This results in an implied 7x target FY21 EV/Sales multiple and ~32x target EV/FCF multiple, a 7% premium to consumer and technology platform peers.

Cue the chart (click to enlarge):

Maintains Overweight rating, raises price target to $144 from $136.

My take: Where Katy Huberty goes, others will follow.


  1. Jerry Doyle said:
    I accept her target price. I expect her bullish case target. Her bear case target is no less than “ludicrous!” Daniel Ives seems to be usurping Ms. Katy in getting it right.

    December 16, 2020
  2. Gregg Thurman said:
    Multi-layered valuation. Imagine that.

    Loved the “Options Implied Probabilities” Chart.

    December 16, 2020
  3. Jonny Tilney said:
    At this moment I would reverse the % likelihood for 77 and 201 ie. 12% for the latter and 3.5% for the former. But then again my target for April 2021 is not exactly an advert for my ability to predict!

    December 16, 2020
  4. Michael Goldfeder said:
    For her bear case Katy should just include a picture of Rod Hall. That would just add to her credibility.

    December 16, 2020
  5. Tommo_UK said:
    Hardware sales are grossly underestimated in all forecasts and don’t account for the super cycle upgrade the M1 will drive in notebooks.

    In addition, recent data I’ve seen shows 65% of searches for new UK network contracts are specifically for iPhones with only 25% for Samsung and the rest a collection of wannabes.

    Of Apple searches, the iPhone 12 led by 25%, the iPhone SE by 20%, the iPhone 11 by 15% and the iPhone X series by 5%, the remainder being a collection of older models on cheap deals demonstrating demand is strong throughout the product lineup and sales forecasts should not be predicated simply on iPhone 12 demand.

    I spoke with a senior EE manager in the UK (Apple’s most important UK network partner) and she said all high end Pro models (especially Max variants) are backordered into January with no guaranteed date, even though their website says “in stock.” Apparently they’re so overwhelmed with orders their new “digital transformation and logistics system” can’t cope and isn’t keeping up with new orders and supply data and can’t be relied on.

    How do I know? I tried to place an order today and had to have it escalated to explain why the 14 days delivery quoted is actually a backorder with a delivery date “likely to be around 7-14th January, though we can’t promise.”

    I’m still waiting for delivery for the first Pro Max I ordered two weeks back.

    December 16, 2020
    • Gregg Thurman said:
      I agree Tommo.

      If we stand back and look at Apple’s near term strengths I think we’ll all agree that they are:

      M1 Macs
      iPhone 12 (any model)
      Air Pod Pro
      Air Pod Max
      Apple Watch
      Apple One

      All of these operate on common processor architectures and OS enabling a unique level of product integration, power and battery life.

      Each of these has the ability to increase unit and revenue market share, and do so in the premium sector, leading to (industry leading) higher revenue, net income and FCF.

      The only real laggard in Apple’s product lineup is the iPad, and it leads the industry in units sold, ASP and revenue.

      I don’t see how any analyst can focus on just iPhone as the driver of AAPL/Apple’s future.

      Apple is a 7 cylinder engine running like a supercharged 8 cylinder.

      $200/share is a question of when, not if.

      December 16, 2020
      • Tommo_UK said:

        “ I don’t see how any analyst can focus on just iPhone as the driver of AAPL/Apple’s future.”

        Just like they did when the iPod was the big story and “peak iPod” was going to be Apple’s death knell in the mid 2000s – until the iPhone took over, even though everyone laughed at Jobs claiming he was only after 1% of the mobile phone market (master of redirection that he was) when it launched.

        Heady days.

        December 16, 2020
        • Gregg Thurman said:
          Heady days.

          I can still remember Steve Ballmer trying to catch his breath as he exclaimed, “$500 for a fully subsidized smartphone!?!,”. “I like our strategy, I like it a lot”.

          Too bad nobody else did.

          December 16, 2020

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