Morgan Stanley Is Bullish on India's Growth Potential for Apple, Expects Strong Revenue and User Growth

Morgan Stanley analyst Erik W Woodring reiterated an Overweight rating on Apple Inc AAPL and raised the price target from $190 to $220.

The analyst is bullish on India as an emerging growth driver for Apple and forecasts the country to account for 15% of Apple's revenue growth and 20% of installed base growth over the next five years. 

Despite being a market with great potential, India has accounted for only 2% of Apple's revenue growth over the last five years. It represents just $6 billion of revenue today, significantly lower than China - a country with a similar population base - which has accounted for 18% of Apple's growth in the last five years and represents $75 billion of revenue today. 

The recent investments in brand awareness, local manufacturing, and affordability programs, combined with India's economic boom and growing digitization, set the stage for India to become Apple's next growth frontier. 

Woodring estimates that India will account for 15% of Apple's revenue growth over the next five years and reach $40 billion of annual revenue in the next decade, equivalent to Apple ramping up an entirely new product category in just ten years. 

The analyst also sees India as the source of over 170 million new Apple users in the next decade, influencing him to raise his subsequent ten-year installed base forecast by 100 million to 2.1 billion (6% CAGR), implying India represents ~10% of Apple users by 2032. 

India will be just as important to Apple's growth algorithm over the next 5+ years as China was in the last five years. As a result, the analyst reiterated Apple as his Top Pick. 

He estimates the Indian smartphone TAM will triple over the next decade, from $32 billion today to $90 billion by 2032, with higher-end devices accounting for 80% of this growth (vs. just 25% from CY15-20)

Recent efforts to accelerate investment in India show Apple is going 'all-in' on India as an emerging growth market. 

Apple began referencing India as an emerging opportunity in 2015-17. While he estimates Apple's business in India has compounded at ~25% CAGR over the last five years, India still represents just $6 billion of revenue or less than 2% of Apple's total revenue. 

However, Apple is investing in India like it hasn't before, moving iPhone production into the country in 2017, launching the India online store in 2020, and opening its first retail stores in Delhi and Mumbai in 2023. He believes these investments represent an acknowledgment from Apple that they are 'all in' on India. 

Feedback from our 2023 AlphaWise India survey shows these efforts are starting to pay off, indicating strong potential for growing iPhone penetration/share gains, an expanding Product and Services ecosystem, and robust prospects for new user acquisition. 

Price Action: AAPL shares traded higher by 1.27% at $193.07 on the last check Monday.

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