Apple jumps after Morgan Stanley raises price target of iPhone maker to $200

• Morgan Stanley has not considered Apple’s upcoming products, like AR/VR headset in raising the price projection

• Katy Huberty increased the iPhone shipment forecast by 3 million units to 83 million units for the December quarter

Morgan Stanley on Tuesday raised Apple Inc’s price target from $164 to $200 and maintained the equivalent of a buy rating but mentioned that the new expected products from the company like an augmented reality headset or self-driving car aren’t taken into consideration.

Shares of Apple jumped 3.75% to $171.58 on the New York trading session, reaching a new all-time high.

Katy Huberty, the MS analyst, also increased the iPhone shipment forecast by 3 million units to 83 million units, an increase of about 4% year-over-year for the December quarter.

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In a note to investors, she said the Cupertino giant hasn’t hit the same supply constraints for this quarter, which it faced in the previous quarter. She also expects App Store revenue to outperform its initial forecasts.

“Today, we know that Apple is working on products to address two significantly large markets – AR/VR and Autonomous Vehicles – and as we get closer to these products becoming a reality, we believe valuation would need to reflect the optionality of these future opportunities,” Huberty said in the note.

Apple’s revenue growth

The note argues that Apple’s stock price has increased nearly 500% over the last five years, primarily due to new products and services earnings, not from iPhone revenue.

While Apple’s revenue from its iPhone has grown 40% since 2016, about 6% of the total revenue over the same period has been generated by new products like AirPods, Apple Watch and some of Apple’s services, which didn’t exist five years ago.

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The services business has grown to nearly $70 billion annually, and the wearables and accessories business adds $38 billion annually to Apple’s revenue, Huberty said.

The Morgan Stanley analyst expects new upcoming products like an AR headset could contribute as much revenue over five years of launch to Apple as the iPad did in its first four years on the market.

The growth will be an increase of around $20 per share in Apple’s current share price, on top of Morgan Stanley’s existing growth projections.

Picture Credit: NY Times