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Apple Still Best Idea At Morgan Stanley, Firm Expects iPhone Growth In December

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Apple Still Best Idea At Morgan Stanley, Firm Expects iPhone Growth In December
  • Apple Inc. (NASDAQ: AAPL) has seen a 10.2 percent decline in its share price over the past six months, from a high of $321.65 on April 27.
  • Morgan Stanley's Katy L. Huberty has maintained an Overweight rating on the company, with a price target of $162.
  • Huberty expects the company to report in-line C3Q15 results, while announcing its C4Q15 guidance pointing toward iPhone growth.

Analyst Katy Huberty elaborated that Morgan Stanley's surveys indicate "stronger than expected iPhone demand, which combined with low valuation and weak sentiment, should drive the stock higher."

Huberty expects Apple to report revenue of $50.9 billion, EPS of $1.87 and gross margin of 39.2 percent for C3Q15, driven by iPhone shipments of 49 million. Morgan Stanley's AlphaWise Smartphone Tracker suggests end demand of 50 million for the September quarter.

Related Link: Citi Removes Apple From U.S. Focus List, Lowers iPhone Sales Estimates

According to the Morgan Stanley report, "The tight range of expectations along with the fact that the new iPhone 6s only sold during two days of the quarter, make the September quarter less relevant to stock performance."

The C4Q15 guidance is expected to be similar to those of the past quarters or marginally lower than the consensus forecasts, suggesting marginal iPhone growth at the mid-point. Over the last 10 quarters, the company's revenue guidance has been 3 percent below the consensus.

Management is also expected to guide to stable gross margin in the range of 38.5 to 39.5 percent. However, Huberty believes that there could be upside to the December quarter, driven by demand for the iPhone.

"Our AlphaWise surveys also suggested consumers are trading up in screen size and capacity, which offset a higher mix of iPhone 6 vs. the new 6s than many initially expected. This means ASPs could be flat year on year in FY16," the report added.

Latest Ratings for AAPL

DateFirmActionFromTo
Feb 2021RBC CapitalAssumesOutperform
Jan 2021DA DavidsonMaintainsBuy
Jan 2021Deutsche BankMaintainsBuy

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