Apple 2.0

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Morgan Stanley's Katy Huberty is bullish on Apple

November 15, 2012: 11:30 AM ET

"iPhone and iPad mini sales," she says, "are surprising to the upside"

Click to enlarge. Source: Morgan Stanley

FORTUNE -- Morgan Stanley's Katy Huberty on Thursday joined the chorus of sell-side analysts coming to Apple's (AAPL) defense in the midst of the stock's worst sell-off since the 2008 recession. (See What's eating Apple?)

"Our Asia supply chain meetings point to potential momentum behind several key AAPL debates," she writes in a note to clients. "Namely, iPhone and iPad Mini sales are surprising to the upside, China Mobile remains a likely 2H13 catalyst, and component costs will fall in 2013 boosting margins."

In typical Morgan Stanley style, Huberty frames her price targets in three scenarios -- the bull, base and bear cases. The base case -- in which Apple holds onto its market share but neither potential catalyst (a TV or a China Mobile contract) materializes, leads to her official 12-month target of $714 per share.

To hit her bull case target -- $910 -- she estimates that Apple would need to ship 210 million iPhones and 120 million iPads next year, grow its revenue 37% and get its gross margin up to 44.4%.

So far, based on what her Asian contacts are telling her, the signs are good.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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