Meanwhile, she's convinced that the Street's Services forecasts for this year and the next are too low.
From a note to Morgan Stanley's clients that landed on my desktop Tuesday:
Services strength drives estimates higher but peer multiple compression drives PT lower to $155 (from $164). Following strong March quarter App Store results and an analysis of the key drivers of Apple's Licensing & Other segment, we raise our already above-street FY21 and FY22 Services revenue estimates by 3% and 5% respectively, and are increasingly convinced that consensus Services forecasts over the next 2+ years are too low.
We now forecast Apple Services revenue growth accelerates by 6 points to +22% Y/Y in FY21, up from +19% Y/Y previously, nearly 4 points ahead of FY21 consensus Services growth of +18% Y/Y.
Keeping the rest of our Product-related estimates unchanged, our stronger Services forecast pushes our FY21 and FY22 total revenue estimates 1% higher, and our FY21 and FY22 EPS 1% and 3% higher, respectively.
However, multiple compression over the last 2 months, primarily at Apple's higher growth Services peers, more than offsets our higher revenue and earnings estimates, driving our new sum-of-the-parts based price target to $156, or 33x FY22 EPS, down from $164 previously.
AAPL shares have underperformed the S&P by 20 points since reporting F1Q earnings (Apple shares are down 13%; the S&P 500 is up 7%) but we believe positive earnings revisions into what we expect to be a strong F2Q earnings report later this month will drive a return to outperformance, keeping us Overweight.
Maintains Overweight rating, lowers price target to $155 [note: $156 in the headline, $155 in the text] from $164.
My take: A mixed bag, but on balance a positive note.
Cue Exhibit 4: