Morgan Stanley ups Apple target price to $220

Morgan Stanley have raised their target price for Apple from $210 to $220 based on their outlook for Services, iPhone 15 gross margins, and high consumer interest in Vision Pro.

William Gallagher for AppleInsider:
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“We are turning more positive on AAPL shares as near-term risks are quelled & attention shifts to what could drive a recovery in fundamentals — Services, GMs and Edge AI,” write the analysts. “With this backdrop, we address the top investor debates into year-end. PT moves to $220 as we M2M our valuation; Reiterate OW [overweight].”

“We believe Apple is well-positioned to be an AI beneficiary via its ability to lead the market on Edge AI,” write the analysts, “with its primary monetization mechanisms being 1) Hardware share gains/replacement cycle contraction, 2) new avenues for traffic acquisition costs (TAC), [and] 3) better Services monetization, 4) App Store purchases, and/or a 5) premium Siri subscription service.”

“In short, we believe the need for more powerful hardware to run AI workloads at the edge could drive an iPhone upgrade cycle,” continues the note, “with every 0.2 year contraction in replacement cycles driving 5-8% upside to our iPhone unit/revenue forecast.”

Morgan Stanley says it has also found “very strong early consumer purchasing intentions” for the Apple Vision Pro. “Our 2023 US China Smartphone survey showed… 33% of US iPhone owners and 74% of Chinese iPhone owners likely to purchase the Vision Pro within the first 12 months of release at the $3,500 price point,” says the note.

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MacDailyNews Note: Much more in the full article here.
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