By Senad Karaahmetovic
Morgan Stanley analysts urged the firm’s clients to take the opportunity and buy the dip in Apple (NASDAQ:AAPL) amid the recent selloff.
Apple shares are trading below $140 and near 4-month highs after the company issued a press release on Sunday to note that it is experiencing iPhone 14 production issues in China amid ongoing COVID-related restrictions.
Bloomberg News reported that Apple expects to ship 3 million fewer iPhone 14 units due to a slowing demand rather than supply chain issues. For the analysts, Apple is seeing a “deferral - not destruction - of demand” for the iPhone 14.
Still, the analysts cut the revenue forecast for the December quarter by $6 billion which led them to cut the price target by $2 per share to $175.
“We see this as a supply problem, not a demand problem, as iPhone 14 Pro and Pro Max channel inventory is below the target range and lead times have remained strong cycle to-date. Said differently, we believe this situation equates to more of a deferral of iPhone demand than a destruction of demand, which does not change our OW thesis,” they told clients in a note.
All-in-all, Morgan Stanley would be a “methodical buyer” of Apple stock as the valuation nears 20x P/E.
“We believe the Street will likely be overly conservative in assuming how much iPhone demand Apple could recoup in the March '23 quarter, which actually somewhat "de-risks" the model and helps to remove an overhang (anticipated iPhone build cuts) that has been central to the bear thesis post-September quarter earnings,” the analysts further stated.
Apple stock price closed at $138.92 yesterday.