On Monday, Morgan Stanley adjusted its outlook on Apple Inc. (NASDAQ:AAPL) shares, reducing the price target from $220.00 to $210.00, yet retaining an Overweight rating.
The firm anticipates Apple to marginally surpass the March quarter revenue and earnings per share (EPS) consensus, attributing the expected performance to steady product demand and notable services sector success. Morgan Stanley's projections stand at $91 billion in revenue and $1.51 EPS.
The firm also provided guidance for the June quarter, expecting figures to align more closely with its own estimate of $80 billion in revenue, as opposed to the consensus estimate of $83.5 billion, which is still more optimistic than buy-side expectations ranging from $78.5 to $81.5 billion.
The EPS forecast for the same period is $1.22. These projections come amid a backdrop of key factors that Morgan Stanley believes will be significant to investors, including Apple's performance in China, updates to its capital return framework, and capital expenditure metrics.
The revised price target of $210, down from the previous $220, reflects a target price-to-earnings (P/E) ratio of 29 times, which Morgan Stanley justifies by "marking our PT to market."
Looking ahead, the firm highlighted several important dates for Apple and its stakeholders: the Epic v. Apple hearing on April 30th, the closing arguments in the Department of Justice's case against Google (NASDAQ:GOOGL) on May 1-3, and the Worldwide Developers Conference (WWDC) scheduled for June 10th.
The Overweight rating suggests that Morgan Stanley continues to view Apple shares (NASDAQ:AAPL) favorably, despite the lowered price target. The firm's analysis and expectations for the tech giant's financial performance indicate a belief in the company's ongoing strength in both product sales and service offerings.
InvestingPro Insights
Reflecting on Morgan Stanley's outlook on Apple Inc. (NASDAQ:AAPL), it's important to consider additional insights from InvestingPro that could provide a broader perspective on the stock's potential. Apple has been actively engaging in share buybacks, demonstrating confidence in its value proposition. Moreover, the company has a history of rewarding shareholders, having raised its dividend for 12 consecutive years, which is a testament to its financial stability and commitment to returning value.
InvestingPro data highlights that Apple operates with a moderate level of debt and has cash flows that can comfortably cover interest payments, indicating a solid financial footing. While the stock is trading at a high P/E ratio relative to near-term earnings growth, suggesting a premium valuation, it is also trading near its 52-week low, which may offer a more attractive entry point for long-term investors.
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