Apple (AAPL) PT Raised to $253 at Morgan Stanley Following Service Growth Survey

(Updated - November 8, 2018 9:41 AM EST) (updated to expand analyst comments)

Morgan Stanley analyst Katy Huberty raised her price target on Apple (NASDAQ: AAPL) to $253.00 (from $226.00) while maintaining an Overweight rating after an AlphaWise survey signals a long runway for Apple service growth.

The analyst highlights that with a maturing, more engaged iOS user base and broadening portfolio of Services, they believe Services represents the key growth driver for Apple over the next 5 years.

Huberty said the survey of US and China smartphone users increases confidence in sustained 20%+ annual Services growth and margin expansion as Services takes the growth baton from iPhone.

The analyst argues the market isn't pricing this in with consensus predicting Services growth rate slows to the mid-teens by FY20 and their Services forecast 11% above consensus over the next four years.

"While the market read announced changes to Apple financial disclosures negatively last week, we view it as a corroborating data point that Apple is approaching a services-led margin inflection, similar to when Amazon began breaking out AWS revenue and profits in 1Q15," she added.

The firm's analysis of the survey adds $27 incremental value tied to Services in our SOTP-driven PT of $253.

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