Morgan Stanley is out with a major call on Apple (NASDAQ:AAPL) raising their rating to Overweight from Equal Weight with target upped to $180 (prev. $105).
iPhone is feeding earnings growth that the market is missing: Firm believes Apple is emerging as the clear leader in the battle over the mobile Internet. They size this as an incremental 4 billion installed base opportunity for Apple, 4x the installed base of PCs and 10x the installed base of MP3 players. Our proprietary survey work points to iPhone-driven EPS upside over the next two years, muting any margin or growth concerns in Apple’s core iPod/Mac business. Consequently, they’re upgrading AAPL to Overweight, raising EPS forecast (CY10 20% above consensus), and increasing price target from $105 to $180.
C3Q09 marks key inflection point: Two key factors drive iPhone unit and EPS upside based on their survey: 1) They expect a price cut to the current generation iPhone to drive 50-100% incremental unit demand (base case assumes 50% on $50 price cut; bull case assumes 100% on $100 cut). 2) Their survey data suggests 15%+ of the iPhone installed base typically upgrade to a new phone (15% base case, 20% bull case). Morgan Stanley also factors in a inventory build post the launch of new products. Net-net, their CY09/CY10 iPhone unit estimates increase 42% and 61% to 24.8/36.2mn. CY10 GAAP EPS shift from $5.52 to $7.50; non-GAAP EPS, adj. only for actual sales of iPhone, increase to $9.00 from $5.67.
Notablecalls: These are some pretty hefty numbers. Don't think I have ever seen iPhone unit estimates increased by that much in a single call.
I think a lot of shorts piled in AAPL last week, hoping for the stock to roll over but Mother Morgan does provide them with a surprise this AM. The call will cause at least some of them to cover. A kind of Potash (POT) like situation from last week.
If this thing gets going, it can do 3-5 pts to the upside today.
Another scenario I see is that it gaps up 2-3pts, then sells off 1-2 pts in the first 45 mins and then resumes to the upside.
iPhone is feeding earnings growth that the market is missing: Firm believes Apple is emerging as the clear leader in the battle over the mobile Internet. They size this as an incremental 4 billion installed base opportunity for Apple, 4x the installed base of PCs and 10x the installed base of MP3 players. Our proprietary survey work points to iPhone-driven EPS upside over the next two years, muting any margin or growth concerns in Apple’s core iPod/Mac business. Consequently, they’re upgrading AAPL to Overweight, raising EPS forecast (CY10 20% above consensus), and increasing price target from $105 to $180.
C3Q09 marks key inflection point: Two key factors drive iPhone unit and EPS upside based on their survey: 1) They expect a price cut to the current generation iPhone to drive 50-100% incremental unit demand (base case assumes 50% on $50 price cut; bull case assumes 100% on $100 cut). 2) Their survey data suggests 15%+ of the iPhone installed base typically upgrade to a new phone (15% base case, 20% bull case). Morgan Stanley also factors in a inventory build post the launch of new products. Net-net, their CY09/CY10 iPhone unit estimates increase 42% and 61% to 24.8/36.2mn. CY10 GAAP EPS shift from $5.52 to $7.50; non-GAAP EPS, adj. only for actual sales of iPhone, increase to $9.00 from $5.67.
Notablecalls: These are some pretty hefty numbers. Don't think I have ever seen iPhone unit estimates increased by that much in a single call.
I think a lot of shorts piled in AAPL last week, hoping for the stock to roll over but Mother Morgan does provide them with a surprise this AM. The call will cause at least some of them to cover. A kind of Potash (POT) like situation from last week.
If this thing gets going, it can do 3-5 pts to the upside today.
Another scenario I see is that it gaps up 2-3pts, then sells off 1-2 pts in the first 45 mins and then resumes to the upside.
No comments:
Post a Comment