Apple Stock Can Crack $250 on Services Growth, Says Morgan Stanley

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Morgan Stanley is getting more optimistic about Apple's (AAPL) opportunity in services.

The firm's analyst Katy Huberty raised her price target for Apple stock to $253 from $226, citing improving trends for the smartphone maker in Morgan Stanley's survey of consumers. She also reiterated her Overweight rating for the shares.

"We think the market underestimates both growth and value impact of Apple's Services business," she wrote on Wednesday. "With a maturing, more-engaged iOS user base and broadening portfolio of Services, we believe Services represents the key growth driver for Apple over the next 5 years."

Apple shares were down slightly in morning trading Thursday to $207.93. Huberty's new price forecast represents about 22% upside to its current stock price.

Read More: Apple Stock Could Rise on a Change in iPhone Sales Reporting

Huberty noted the firm's survey of 4,000 consumers revealed rising spending intentions for Apple's App Store, Music and Apple Pay offerings. She predicts the average annual spend per user for the company's services will rise to $220 by 2023 versus $120 today.

"Apple is transitioning to more-stable, higher-margin, Services-led growth," she wrote. "Accelerated Services growth, margin expansion, and cash return to shareholders are catalysts that can help sustainably re-rate shares."

Huberty's price-target raise came just one week after she lowered her Apple stock forecast to $226 from $247 on Nov. 1. At the time, she cited recent valuation "multiple compression" among Services peers - including Spotify Technology (SPOT), Netflix (NFLX) and Amazon.com (AMZN) - as the reason for her price target cut.


Listen to a conversation between tech reporter Tae Kim and Alex Eule about IBM's attempted reboot in the this episode of The Readback. The two also discuss a recent report claiming that Apple will cut back on iPhone-production. You can sign up for the podcast in iTunes or wherever you listen to podcasts.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Technology , Stocks
Referenced Symbols: AAPL , SPOT , NFLX , AMZN

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