Apple (AAPL) PT Raised to $340 at Morgan Stanley as App Store Outperforms Quarter-to-Date

June 3, 2020 4:34 AM

(Updated - June 3, 2020 6:34 AM EDT)

Morgan Stanley analyst Katy Huberty raised the price target on Apple (NASDAQ: AAPL) to $340.00 (from $326.00) while maintaining an Overweight rating, citing strong App Store revenue growth.

The analyst comments "Based on preliminary data from Sensor Tower, we estimate App Store net revenue grew 39% Y/Y in the month of May, the strongest Y/Y growth for the App Store since April 2017,and an 8 point acceleration in Y/Y growth from April (and a 20 point acceleration from March Q growth of +19% Y/Y; Exhibit 1). QTD through May, App Store net revenue is up 35% Y/Y, meaningfully outperforming our +18% June quarter forecast. As a result, we are raising our June quarter App Store growth estimate to +32% Y/Y, which conservatively assumes that App Store growth slows to +25% Y/Y in the month of June (despite a 5 point easier comp; Exhibit 2). Keeping the rest of our Services segment forecasts unchanged,and flowing through the $500M+ of App Store upside, we now forecast +16.7% Services growth in the June quarter (to $13.4B),nearly 5 points higher than our prior +12% Y/Y forecast,and ~2 points higher than the June quarter consensus estimate of $13.2B. In addition, we maintain a similar Services recovery trajectory as our prior forecast, with sustained higher App Store growth rates in FY21 (Exhibit 3), driving our FY20 and FY21 Services forecast to $54.1B (+16.9% Y/Y) and $63.7B (+17.8% Y/Y), respectively."

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