Tuesday, February 26, 2008

Apple (NASDAQ:AAPL): Apple is preparing for meaningful product launches - Morgan Stanley

- Morgan Stanley is out positive on Apple (NASDAQ:AAPL) this AM saying they continue to believe new product announcements and margin expansion will drive AAPL shares higher in 2008. In the near-term, unit expectations need to come down as the product line transitions to higher ASP offerings (iPhone, iPod Touch) But, strong Mac shipments and Apple’s ability to leverage favorable component pricing, leave their CY08 above consensus EPS unchanged.

Beyond industry checks, the firm would point to a 34% YoY increase in R&D and 170% YoY increase in Steve Jobs’ airplane expense in the December quarter as signs Apple is preparing for meaningful product launches.

Apple’s 10-Q shows surprising margin leverage outside the US and a comparison to other retail brands confirms that International expansion tends to be a positive influence on revenue growth, operating margins and valuation. In the near-term, they highlight favorable component pricing that will put upward pressure on gross margin.

Notes AAPL shares already trade at firm's 12-month bear case scenario and they like the risk/reward here (12% downside/55% upside to $185 tgt)

Reits Overweight.

Notablecalls: Can't believe I was actually right, calling it a short last Thursday following disappointing data from iSuppli (see archives).

Yet, now I think it's all priced in here @ around $120. I think people are just looking for a reason to buy this stock and MSCO may have given them the reason to do so.

We are going to see a bounce in AAPL in the n-t.

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