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Morgan Stanley Raises Apple's Price Target On Video Optimism

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Morgan Stanley Raises Apple's Price Target On Video Optimism
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For the second consecutive day, a major Wall Street firm raised its price target for Apple, Inc. (NASDAQ: AAPL) ahead of the iPhone event scheduled for Sept. 12.

The Analyst

Morgan Stanley analyst Katy Huberty reiterated her Overweight rating and raised her price target for Apple from $232 to $245.

The Thesis

According to Huberty, video will provide the next major growth leg for Apple Services revenue starting in 2019. Apple is investing $1 billion in video content, including 24 shows and partnerships. Huberty said video will add 2 percent annually to Services revenue growth. While video will be dilutive to earnings in the medium-term, she says it will be accretive in the long-term.

Huberty values Apple Video at $4 billion-plus and said the company will likely focus on more targeted content than Netflix, Inc. (NASDAQ: NFLX) or other popular streaming platforms.

“On a stand-alone basis, we forecast that an Apple Video streaming service with high quality but limited breadth could be priced at the low end vs. competitors, or $7.99/month,and reach over 50M paid subscribers by 2025, compared to 124M at Netflix (current paid streaming subs) and Apple's >650M unit iPhone installed base,” Huberty wrote in a note.

She estimates an Apple Media bundle of Apple Music and Apple Video could grow into a $37 billion revenue stream by 2025.

Morgan Stanley’s price target hike comes just one day after Canaccord Genuity raised its target for Apple from $220 to $250.

Price Action

Apple traded lower by about 1 percent Wednesday morning to $226.14.

Related Links:

Canaccord Raises Apple Price Target Ahead Of iPhone Event

6 Investing Lessons From Apple's $1 Trillion Climb

Latest Ratings for AAPL

DateFirmActionFromTo
Nov 2018UBSMaintainsBuyBuy
Nov 2018GuggenheimDowngradesBuyNeutral
Nov 2018Morgan StanleyMaintainsOverweightOverweight

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StockFirmActionPT
ACBIKeefe Bruyette & WoodsUpgrades21.0
COTYBMO CapitalUpgrades12.0
ECCOppenheimerDowngrades0.0
VYGRRaymond JamesUpgrades0.0
ATNXJP MorganUpgrades15.0
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