Short-term macro issues don’t hurt long-term value appleMorgan Stanley analysts reiterated their Overweight rating and $175 price target in a note on Friday.
Morgan Stanley’s Eric Woodring said: “It’s rare for Apple to fail and fall in a quarter, but I believe the long-term positives from tonight’s report will outweigh the short-term negatives. Apple’s Thursday night earnings report cited a strong dollar, continued production problems in China and the broader macroeconomic environment as three reasons for Apple’s year-over-year sales decline since 2019. increase.
“The third factor is the challenging macroeconomic environment, which I think you’ve heard from everyone,” CEO Tim Cook told CNBC’s Steve Kovac.
but Morgan Stanley We rate these headwinds as temporary, and both the accelerated growth of the iPhone installed base and the continued upward trend in profit margins will ensure that “the Apple flywheel continues to spin” in the long term. It is pointed out as an important factor for the increase.
Morgan Stanley repeated Apple’s highest rating. The company has managed to weather the broader tech downturn with considerable success, and he’s one of the few tech companies to stem layoffs and maintain a constant operating cost discipline.
It’s the same discipline that’s helped Morgan Stanley analysts maintain their bullish outlook on Apple, according to the memo, with March 2023 gross margin expected to range between 43.5% and 44.5%. bottom.
“It is impressive that Apple has posted the highest gross margins in the last decade, despite year-over-year revenue declines, and going forward, mix, FX, commodities and logistics will all be Apple’s We expect our gross margins to improve as we favor the rest of 2023 and into FY24,” the Morgan Stanley memo said.
Apple’s user spending levels also kept Morgan Stanley bullish, proving that “the underlying dynamics of Apple’s model remain strong.”
Investors clearly embrace Morgan Stanley’s assessment of Apple’s durability as a long-term investment. Apple shares were up about 1% at the start of trading on Friday, but he recouped a 4% loss on Thursday night despite a failed sale. The company also reported misses on the top and bottom lines, beating analysts’ expectations on iPad and services revenue alone.
— CNBC’s Michael Bloom contributed to this report.