Morgan Stanley Stories January 8, 2016

AAPL: 96.96

0.51

Analysts pile the pressure on AAPL saying company over-optimistic or “deliberately overstating” position

As if Apple’s management wasn’t under enough pressure from the stock falling below $100 yesterday, two firms of analysts have said that the company was either over-optimistic in its iPhone sales expectations or has even been guilty of “deliberately overstating underlying trends.”

Business Insider quotes excerpts from investor notes from Pacific Crest and UBS, each suggesting that Apple has over-estimated iPhone demand. Both point to apparent contradictions between Apple’s predictions of continued growth and supply-chain reports of reduced orders.

UBS says that it believes Apple has been taken by surprise with the relatively low numbers of people upgrading from older iPhones.

We think the most likely reason for a shortfall is that the upgrader portion of unit demand has stalled significantly in recent months and is failing to meet Apple’s own expectations.

The note from Pacific Crest goes much further.

Management’s confidence now looks highly likely to be misplaced, which suggests that it was either ignorant of the challenges it faced or deliberately overstating underlying trends. The former seems unlikely, which suggests that management has taken a much more aggressive tone as growth in the high-end smartphone market has slowed. This reduces our confidence in Apple’s commentary going forward.

Business Insider notes that the Wall Street consensus is for significant year-on-year fall in the current quarter, ranging from Stifel, Aaron Rakers and team forecasting an 8% drop in sales through to Pacific Crest at 18%. Even noted Apple bull Katy Huberty at Morgan Stanley is predicting a 15% fall this quarter.

As we noted earlier, Apple’s guidance for the current quarter will be issued when it reports its holiday quarter numbers on January 26th.

Photo: wallpapersfine.com

Morgan Stanley Stories December 14, 2015

AAPL: 112.48

-0.70

Update: Fortune reports that in a conference call, Huberty said her forecast was in part based on an estimated 10% drop in component orders. She noted that this could be due to robust inventories rather than weak demand, and that the numbers in the note were a ‘worst-case’ scenario. Huberty emphasized that she remains upbeat on Apple, citing a strong brand, loyal customers, R&D investment and other revenue streams compensating for weaker predicted iPhone sales.

[tweet https://twitter.com/philiped/status/676410189852078080 align=’center’]

The brand is strong. Customers are loyal. Gross margins are stable. R&D is going full tilt. And revenue streams from new products (Watch, Apple TV), apps, and media could start to make up for slowing iPhone growth.

An investment note by Morgan Stanley Katy Huberty predicts that Apple will see its iPhone sales fall by 5.7% in Apple’s 2016 financial year, reports Business Insider. The prediction is significant for two reasons: if realised, it would be the first time since the launch of the iPhone that sales have fallen year-on-year – and the forecast is made by a noted Apple bull.

Morgan Stanley thinks that Financial Year 2016 iPhones sales will be 218 million – a 5.7% drop — while Calendar Year 2016 sales will be 224,000 — a 2.9% drop. These predictions are significantly below Huberty’s previous estimates, of 247 million for FY2016 and 252 CY2016.

One of the reasons given isn’t new – high smartphone penetration in developed markets – but Huberty says there is a second reason …

expand full story

Morgan Stanley Stories November 3, 2015

AAPL: 121.18

1.68

Apple’s planned manufacturing spend suggests a huge holiday quarter – Morgan Stanley

While most analysts are expecting Apple to comfortably beat its holiday quarter guidance of $75.5-$77.5B, one large firm of analysts goes much further.

An investment note by Morgan Stanley seen by Business Insider says that an analysis of Apple’s financial report suggests that the company could be gearing up for quarterly sales totalling as much as $84.4B.

The clue, claims the company, is the company’s off balance-sheet spending commitments.

Apple’s last quarterly report revealed $29.5 billion in off balance-sheet commitments, and $7.3 billion in other commitments, at the end of the September quarter.

These usually represent money that Apple is planning to spend on parts and manufacturing equipment.

It should be noted that although Apple has recently been beating its own guidance of late, this has typically been by just a few percent – nothing like the leap Morgan Stanley is suggesting. While Steve Jobs used to give extremely conservative guidance, seemingly enjoying blowing expectations out of the water, Tim Cook promised more accurate guidance under his leadership and has more-or-less been delivering on that.

It also wouldn’t be the first time the analysts have made big leaps on little data. We’re going to file this one in the skeptical pile.

Morgan Stanley Stories August 6, 2015

AAPL: 115.13

0.25

Morgan Stanley maintains AAPL as a buy, giving four reasons for expecting stock to climb

Following Bank of America Merrill Lynch yesterday giving six reasons for downgrading AAPL stock, Morgan Stanley has responded today with four reasons it continues to rate the stock a Buy, reports Business Insider.

In a note to clients on Thursday, Morgan Stanley’s Katy Huberty maintained an “Overweight” rating and $155 price target on the stock, arguing that the company will not see a similar stock meltdown to what was experienced after a huge run-up in 2012. 

While acknowledging that supply may be catching up with demand, leading to supply chain reports of seemingly weaker sales, Huberty says there are four reasons the stock is likely to climb.

  1. Gross margins are improving, not deteriorating, as the company heads into the next iPhone cycle.
  2. There’s low institutional ownership of the stock. 
  3. Apple has a more competitive product line-up and a “stickier” ecosystem against Android.
  4. There’s a more robust product and services roadmap.

Addressing concerns about the impact the weak Chinese economy may have on Apple, Huberty says that smartphones costing more than $300 each have been increasing their market share, meaning that Apple is well placed to continue to grow its business in the country.

Morgan Stanley Stories January 14, 2015

A Credit Suisse survey of iPhone 6/Plus owners found that 18% of them would ‘definitely’ buy an Apple Watch, with a further 11% saying they would probably buy the upcoming smartwatch, reports Business Insider.

A general rule of thumb when interpreting purchase intention claims is to count only those who say they will ‘definitely’ buy (some of them won’t, but that’s balanced out by the fact that some of the ‘probably’ and ‘maybe’ categories will). That would suggest around 35M sales in the first year …  expand full story

Morgan Stanley Stories December 11, 2014

A report by Taiwan’s United Daily News claims that Apple supplier Quanta will begin mass-production of the Apple Watch in January, echoing an earlier supply-chain rumor from September. It claims that the initial production run will be between three and five million units.

The report says that there have been ‘breakthroughs’ in yield issues, and that the company increased its production staffing from 3000 to 10,000 workers in the second half of the year, with further recruitment ongoing …  expand full story

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