Apple Price Target Raised to $419 by Morgan Stanley; Says iPhone Pot of Gold

Expanding iPhone trade-in programs can unlock $147 billion of value and fund one-third of iPhone purchases over the next three years, wrote Morgan Stanley’s equity analyst Katy L. Huberty, who raised Apple Inc’s price target to $419 from $340.

Apple, an American multinational technology company headquartered in California, first introduced its new iPhone trade-in program in 2013, relaunched in January last year. Since then the big tech giant launched its trade-in offering in its retail stores, online website, and through channel partners in most major countries. However, that campaign is relatively at its nascent stage.

According to Morgan Stanley’s AlphaWise consumer survey, close to 50% of consumers currently trade-in their old electronic devices and it anticipates over time greater adoption will result in a lower effective price paid for Apple devices, making it more price competitive.

“We are increasingly convinced that the combination of new technologies – 5G, LiDAR scanners, faster processors, etc. – a broader range of iPhone price points including the recently launched SE, and increasing adoption of trade-in programs that gives Apple a competitive pricing advantage over peers will drive an acceleration in iPhone upgrades in FY21 that was not previously embedded in our iPhone forecast,” Katy L. Huberty, equity analyst at Morgan Stanley said.

“As a result, we are raising our FY21 iPhone shipment forecast to 218M units (from 205.2M units), which assumes that iPhone replacement cycles contract by ~5 months to 3.7 years in FY21 (Exhibit 4), roughly in-line with the contraction in desktop replacement cycles after the 2008/2009 Great Financial Crisis.”

Morgan Stanley with a base case forecast of $419, predicts $636 under a bull-case scenario and $169 under the worst-case scenario. Several other equity strategists have also updated their views on Apple.

Thirty-two analysts forecast the average price in 12 months at $359.43 with a high forecast of $450.00 and a low forecast of $250.00. The average price target represents a -6.60% decrease from the last price of $384.83. From those 32, 25 analysts rated ‘Buy’, six rated ‘Hold’ and one rated ‘Sell’, according to Tipranks.

Monness Crespi & Hardt set a “Buy” rating and a $370.00 price target on the stock. BidaskClub raised Apple rating to a “Strong-buy” from a “Buy”. Credit Suisse Group set a $295.00 price target and kept the stock rating as “Neutral”. We expect it is good to buy at the current level as 50-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity.

“Apple has the world’s most valuable technology platform with over 1.5 billion active devices, and is well-positioned to capture more of its users’ time and spend in areas such as music, video, augmented reality, health, autos and home. Sustained mid-to-high-teens Services growth, positive product mix shift, and a re-acceleration of the hardware business are catalysts that can help sustainably re-rate shares,” Morgan Stanley’s Huberty said.