Morgan Stanley raises its Apple target $8 to $152

“We are buyers ahead of what we expect to be a record December quarter print.” — Analyst Katy Huberty

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

Our recent conversations suggest investors expect Apple to release solid, but not great, December quarter results. We disagree and believe that Apple is likely to report all-time record quarterly revenue and earnings.

Our checks point to strength across Apple’s entire Product and Services portfolio, and we model double digit Y/Y growth for all 5 revenue segments in the December quarter, with risk skewed to the upside for iPhone, Mac and Services.

Overall, our December quarter revenue of $108.2B is 5% above consensus (we are ahead of consensus in every segment but Services), while our EPS of $1.50 is 7% above consensus (Exhibit 1).

We expect demand strength to continue and our FY21 revenue and EPS estimates are both 5% above consensus. Given positioning into the quarter is muted after the rotation out of high quality stocks over the past several months, we expect strong follow through post-earnings and are buyers into the print.

Beyond the near term, we expect iPhone demand to remain strong throughout FY21, and forecast 220M iPhone shipments, 2% ahead of consensus estimates. March quarter iPhone builds of 50M (+39% Y/Y) already point to an above seasonal start to the calendar year, and Apple’s Taiwanese supply chain partners have just recorded 3 consecutive months of accelerating Y/Y sales growth (all of which were stronger than normal seasonal patterns), which we believe signals iPhone strength in the upcoming quarters

Maintains Overweight rating, raises price target $152 from $144. (Bull case $200, bear case $77.)

Cue Exhibit 1 (click to enlarge):

My take: Where Huberty goes, others will follow.

See also: Morgan Stanley: iPhone, notebook sales hit records

8 Comments

  1. Dan Scropos said:
    Pretty close to my $1.56 in EPS.

    1
    January 20, 2021
  2. Gregg Thurman said:
    Katy’s revenue and EPS estimates are higher than my recently upgraded estimates by over 3%.

    Katy is so accurate that I’m going to revisit my assumptions (and here I thought my upgrade was aggressive).

    2
    January 20, 2021
  3. Steven Philips said:
    MY take:
    Where Katy goes – I – will follow! 🙂

    2
    January 20, 2021
  4. Michael Goldfeder said:
    I’ll be happy to declare Katy the winner as those numbers work just fine for me.

    3
    January 20, 2021
  5. Jerry Doyle said:
    This revised projection should come as no surprise to Apple 3.0 followers. A number of PED’s Apple 3.0 subscribers for months have prognosticated a PT of 150 by the Q2 2021 earnings call and a $200 stock price a year out.

    Analysts, its the macro economic expansion output involving humongous liquidity (with huge amounts more to come), coupled with the perfect storm where employees WFA and the evolution of LFH in the midst of a worldwide pandemic lockdown coupled with a soon to follow pent-up revenge spending and desire to take flight that will propel economies of the world to higher growth. It’s the big macro economic picture that drives the suppliers’ numbers that analysts have waited months to verify as being real. Certainly they are real. If analysts had raised their heads months ago from scurrying among the weeds to look above at the tsunami of liquidity flowing into the economy then they would have known the forest soon will turn into a sea. We are approaching that scenario in 2021 on into the future. It’s not just going to lift the Apple boat, but all boats stranded in the marsh.

    0
    January 21, 2021
  6. Fred Stein said:
    Here’s the best part.

    Many stocks have bubble valuations. Katy shows AAPL as the safe haven if the bubble bursts elsewhere. The feels good. And the numbers work.

    1
    January 21, 2021

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