Apple Gets Street-High Target at Morgan Stanley on TV+ Boost
Apple Gets Street-High Target at Morgan Stanley on TV+ Boost
(Bloomberg) -- Apple Inc., which this week saw its shares touch a record high, just earned a new Street-high price target.
Morgan Stanley raised its target to $289 a share from $247 a share, the highest among analysts tracked by Bloomberg and implying 20% upside from Tuesday’s closing price. The bank cited Apple’s upcoming TV+ release next month, contrasting with other brokers who have been less positive about the service.
“The market view is that with the launch of TV+, Apple is entering a new, more capital intensive market with a low probability of generating a positive return,” analysts including Katy Huberty wrote in a note to clients. “We disagree, and see Apple TV+ boosting services revenue growth by two points in FY20, adding one point, on average, to Apple EPS in FY21 and beyond,” they wrote.
Apple shares rose 1% to $242.45 at 9:30 a.m. New York time., setting a new intraday record.
Morgan Stanley’s comments come after a report from Goldman Sachs last month, in which analyst Rod Hall cut his price target on concern that an aggressive pricing strategy for TV+ could trim earnings. Apple said the service won’t have a material impact.
Apple recruited stars including Jennifer Aniston, Oprah Winfrey and Samuel L. Jackson for TV+ original productions and may spend as much as $2 billion by the end of fiscal 2020 if it rolls out two shows a month after launch, according to Morgan Stanley estimates. The service can become a $9 billion-dollar-a-year revenue business with 136 million paid subscribers by 2025, the bank said.
Morgan Stanley’s price target hike was also driven by a forecast for better iPhone growth as replacement cycles peak and 5G drives device upgrades. Bullish expectations for the iPhone 11 from other analysts propelled the stock to record levels earlier this week. The previous Street-high target was $280, set Monday by Raymond James. The average price target among analysts surveyed by Bloomberg is $228, up $7 since the start of October. Bernstein also raised its target Wednesday, to $225 from $205.
Apple became the most-shorted U.S. stock as of Sept. 20 as Tesla Inc. saw an increase in short covering, according to financial analytics firm S3 Partners. It’s largely a function of Apple’s growing size, as short interest is valued at $10.5 billion but accounts for just 1.1% of available shares, S3 said.
--With assistance from James Cone, Catherine Larkin and Ryan Vlastelica.
To contact the reporter on this story: Joe Easton in London at jeaston7@bloomberg.net
To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Jon Menon
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