Morgan Stanely sees 'iPhone pot of gold' driving AAPL to $419 per share

Morgan Stanley raised its AAPL price target to $ 419, suggesting that Apple’s upgrade and trade programs could help the company unlock a “pot of gold for the iPhone.”

In an analyst research note seen by Appleiphonestop, lead analyst Katy Huberty says iPhone users currently have an exchange value of almost $ 147 billion with the potential to “finance 41% of purchases from iPhone over the next three years. ”

Currently, about 48% of consumers take advantage of Apple exchange programs. But a Morgan Stanley AlphaWise consumer survey of 10,000 users in the United States, the United Kingdom, Germany, China, and India suggests that 77% of consumers plan to exchange a device by 2021.

“Improved iPhone affordability combined with an aging installed base, a wider product range and compelling new technology leads us to increase our FY21 and FY22 iPhone shipping forecasts by 6% and 3% respectively, “wrote Huberty.

The accelerated adoption of the iPhone exchange program, which could increase to 64% in 2022 and 77% in 2025, could help increase Apple’s revenues in the long term. The program itself is still nascent, as the current recovery campaign was only announced in January 2019.

Another factor that plays a role in Huberty’s forecasts includes the high resale value of the iPhone, which the analyst calls a “key differentiator”. Apple is also planning a 4.1-year iPhone replacement cycle, which could lead to the adoption of the 5G “iPhone 12” models later in 2020.

Although iPhones retain their value much better than Android devices, Huberty says that this year’s “iPhone 12” models may not be much different from the price of the “iPhone 11” line.

The growing movement of “sustainability” around the world could also help increase the use of the Apple exchange program, as the company regularly touts the way it repackages and recycles the devices that have been traded. In 2019, Apple’s programs diverted 322,000 metric tonnes from landfill waste, for example.

Credit: Morgan Stanley

Because of these factors, as well as the adoption of new technologies and features in upcoming iPhones, Huberty says Apple has a competitive pricing advantage “that was not previously integrated” into Morgan Stanley forecasts .

The analyst brings his forecast of iPhone shipping to 2021 to 218 million units, against 205.2 million. Huberty is also increasing its iPhone revenue forecast for this year to $ 163.3 billion from $ 157.8 billion.

Morgan Stanley also increased its June quarter product estimates on better than expected supply and demand data over the past eight weeks.

Huberty’s 12-month AAPL price target is now $ 419, compared to $ 340. This is based on a multiple of the enterprise sales value (EV / Sales) of 5.5 times and a multiple of the target profit price (P / E) of 26.5 times.

AAPL’s shares are currently trading at $ 392.93 on the NASDAQ. That’s an increase of 2.35% on the day and is currently the highest market price for the company to date.

In a separate but equally positive research note, Wedbush analysts raised their Apple price target to $ 450. They also cite the expected demand from users selling older devices.

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