On Monday, Morgan Stanley (NYSE:MS) has reiterated its Overweight rating on Apple shares (NASDAQ:AAPL), raising the price target to $273 from the previous $216. The firm emphasizes the potential of "Apple Intelligence" to initiate a significant multi-year upgrade cycle for Apple's products.
This upgraded outlook is based on the anticipation that Apple will sell nearly 500 million iPhones over the next two years, which is a 6% increase from the record sales cycle of fiscal years 2021-2022.
The firm's analysis suggests that Apple's upcoming upgrade cycle could be more substantial than previously estimated, potentially leading to nearly $485 billion in total revenue and $8.70 in earnings power by fiscal year 2026. These figures are 7-9% above the consensus. A price-to-earnings target multiple of 31x is the basis for the new price target, indicating a more than 20% upside and a favorable risk-reward skew.
Morgan Stanley highlights three near-term positive catalysts for Apple: the third fiscal quarter earnings, the mid-September iPhone launch, and the potential for positive iPhone build revisions in mid-October. According to the firm, these factors, combined with historical trends showing that accelerating unit growth tends to drive Apple stock outperformance, support the view that Apple's recent market success is likely to continue.
Apple is now Morgan Stanley's top pick in the U.S. IT Hardware sector, surpassing Dell (NYSE:DELL), which is now the firm's preferred enterprise hardware Overweight. The firm's decision to elevate Apple's status is rooted in a series of analyses and projections that underscore the tech giant's growth trajectory and market position.
In other recent news, Apple Inc. has been the subject of various developments in the tech industry. Morgan Stanley raised its Apple stock target to $273, citing potential growth in iPhone and iPad shipments. The revised forecast for the company's fiscal year 2026 earnings per share (EPS) is now $8.70, 7% above Wall Street's consensus estimates.
In parallel, Taiwan Semiconductor Manufacturing Co (TSMC) is predicted to see a 30% surge in its second-quarter profit due to robust demand for AI chips. This projection is based on a LSEG SmartEstimate that aggregates projections from 20 analysts.
Apple has also agreed to open up its near-field communication (NFC) technology to competitors, resolving a long-standing EU antitrust investigation. This move will allow for more competitive mobile payment solutions within the iOS ecosystem in the European Economic Area.
TSMC's shares have reached a significant milestone, surpassing the trillion-dollar mark, driven by the demand for AI applications. This achievement solidifies TSMC's status as Asia's most valuable company.
In the personal computer industry, Apple has seen a substantial 20.8% growth in global shipments in the second quarter, outpacing other manufacturers. This surge in demand is attributed to AI-capable devices.
Finally, KeyBanc Capital Markets maintained its Sector Weight rating on shares of Apple, citing an increase in iPhone 16 production forecasts and recent financial data, while expressing caution regarding Apple's near-term growth prospects.
InvestingPro Insights
Morgan Stanley's optimistic outlook on Apple's future is echoed by some of the data available on InvestingPro. Apple's market capitalization stands at an impressive $3.54 trillion, underlining its position as a heavyweight in the tech industry. The company's P/E ratio, as of the last twelve months leading up to Q2 2024, is 35.21, which is high but could be justified by Apple's robust return on assets of 29.99%, indicating efficient management and a strong market position. Additionally, Apple has shown resilience with a gross profit margin of 45.59%, suggesting that it maintains a significant competitive edge in terms of profitability.
InvestingPro Tips further reveal that Apple has a track record of raising its dividend for 13 consecutive years, a testament to its financial health and commitment to shareholder returns. Moreover, the company's stock has experienced a strong return over the past three months, with a 33.68% price total return, which could be an indicator of investor confidence in its growth prospects.
For readers looking for more in-depth analysis and additional InvestingPro Tips, there are currently 17 more tips available for Apple. By using the coupon code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription to gain access to exclusive insights and data that can inform their investment decisions.
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