Market Overview

Morgan Stanley Recommends 'Adding To Positions' On iWatch, iPhone Launches

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Buying fueled by Tuesday’s research report may be enough to push Apple (NASDAQ: AAPL) shares over $100 for the first time since the company’s seven for one stock split.

“We recommend adding to positions into the iPhone 6 + iWatch product cycles,” says analyst Katy Huberty of Morgan Stanley.

iWatch

Speculation has been swirling around Apple’s iWatch for almost two years. A slow start to Samsung's smartwatch has worried investors about the viability of Apple’s product. Morgan Stanley disagrees.

“We believe iWatch is an underappreciated market opportunity with the potential for up to 60M shipments in the first year,” writes Huberty. The report further states the iWatch will be able to deliver margins higher than 40 percent, contributing to a strong product mix.

“We see iWatch as an important barometer of the company's innovation capabilities under theleadership of Tim Cook.”

Related Link: Phone Arena Says Sapphire Glass Unlikely to be Ready for iPhone 6 September Launch

Ownership

Apple only makes up an average 2.3 percent of its top 100 holders’ portfolios. This is almost half the value of 2012 and compares to Apple’s 3.4 percent weighting in the S&P 500.

Morgan Stanley says low institutional ownership provides a buying opportunity. Nonetheless, shares are trading near all-time highs, indicating retail interest is increasing or more funds are adding Apple (albeit in smaller quantities).

Leadership

After "adding well over a dozen leaders in key areas of competency, including fashion, medical research, digital content & marketing, and wearables, we believe CEO Tim Cook now has the bench in place to execute on new product categories," writes Huberty.

The research report says these leadership changes show Apple’s commitment to expanding beyond the iPhone and iPad. Fourth quarter R&D spending is expected to climb 60 percent year over year.

Shares of Apple were last trading at $99.56, up 0.4 percent in the pre-market session.

Latest Ratings for AAPL

DateFirmActionFromTo
Nov 2014Morgan StanleyMaintainsOverweight
Nov 2014JefferiesMaintainsHold
Nov 2014OppenheimerMaintainsOutperform

View More Analyst Ratings for AAPL
View the Latest Analyst Ratings

Posted-In: iWatch Katy Huberty Morgan StanleyAnalyst Color Analyst Ratings

 

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