Apple still not as expensive as rivals even with $2 trillion market cap, Morgan Stanley says

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  • Even as Apple touts a $US2 trillion market cap, investors can find opportunity in the stock, Morgan Stanley said Sunday.
  • The bank raised its base-case price target for the shares to $US520 from $US431, implying a 5% gain from Friday’s close over the next year.
  • The firm’s bull case sees Apple stock leaping as high as $US681, roughly 37% higher than its last close.
  • Apple should be valued more like a consumer platform or tech stock, the team of analysts said. As such, “the stock is not as expensive vs. peers” and “has further room to run,” they added.
  • Watch Apple trade live here.

Apple’s$US2 trillion market cap has a growing number of experts questioning whether shares jumped too far, too fast.

Morgan Stanley isn’t worried, and instead sees the company rallying as much as 37% over the next year on continued services growth and a major iPhone update.

The tech titan’s recent quarterly report showed strong revenue, cash flow, and profit growth despite a 1% year-over-year decline in iPhone sales. Apple should be valued more like a consumer platform or tech stock than a cyclical hardware company as it further diversifies its income sources, the team led by Katy Huberty said.

Yet the company still trades at a discount on a cash flow basis to peers in both sectors, “which indicates the stock is not as expensive vs. peers and implies the stock has further room to run,” they added.


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Just how much room Apple can run depends a great deal on its non-iPhone revenue streams. Morgan Stanley raised its base-case price target for the stock to $US520 from $US431 on Sunday, implying shares can creep another 5% from Friday’s closing level as investors assess the sum of Apple’s hardware and software units.

Even in the base case, Apple is set to outperform the S&P 500 in the near term, according to the bank. Shares are already up 72% year-to-date. The company’s upcoming four-for-one stock split and upcoming 5G iPhone launch present opportunities for continued outperformance, the team said.

Yet Morgan Stanley sees even stronger upside ahead should Apple ride a perfect wave of iPhone upgrades and services growth. The team’s bull case has shares leaping as high as $US681 over the next year, so long as iPhone upgrades accelerate and services growth jumps to 21%. Such stock gains would mark a roughly 37% climb from Friday’s close, enough to push Apple to a $US2.9 trillion market cap over the next year.

“Given greater confidence in the sustainability of long term growth,” investors could value Apple at enough of a premium to constitute such a run-up, the analysts said.

Apple traded at $US500.26 per share as of 3:07 p.m. ET Monday, up about 72% year-to-date.


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