Morgan Stanley on Apple’s Peek Performance news

Morgan Stanley analyst Katy Huberty has shared her insights concerning Apple’s Peek Performanceannouncements with clients in her most recent note.  The analyst maintains a $210 target on the company’s stock, but thinks it may go higher.

Insights into Apple’s growing business

As was more or less anticipated Apple introduced a new iPhone SE3, iPad Air, M1 Ultra, and Mac Studio (and Display). Huberty argues that their announcement shows the “unmatched output” of Apple’s $26 billion annual R&D engine.

Huberty believes the products will inspire tens of millions of product sales and will help Apple keep existing customers on its platforms while attracting new ones and generating additional spend on attached products and services. She points out that Apple added more new users to the iPhone line-up this fall than in any of the past five launches.

She also argues that the expansion of the Mac portfolio will help Apple continue to gain share in the PC market.

“Apple remains our Top Pick in IT Hardware given durable fundamentals, predictable cash flows, additional 2022 product launches, and platform stability in an otherwise uncertain and volatile market backdrop,” she wrote.

97% of Macs sold now run Apple Silicon

Huberty predicts around 22.6 million iPhone SE shipments but observes that the last iteration of the iPhone SE achieved bigger numbers to argue that Apple may exceed that. She also observes that Morgan Stanley’s China team expects 25 millions of these devices will be made this year.

Huberty had some interesting insights into sales of Apple Silicon Macs.

She estimates that 97% of Mac desktops and notebooks sold in the fourth quarter 2021 featured Apple Silicon, up from 53% in C4Q20 and 0% in C4Q19, when Macs were stuck on Intel chips.

That’s interesting as it gives us some sense of how large the ultra-professional Mac user market might be. That matters as we know Apple has now migrated most of its computers to the new chip, with only the Mac Pro now set to come. We also know Mac sales have continued to increase since it introduced the first M1 models.

Challenges are emerging

There are some big headwinds to PC sales, Morgan Stanley warned in an additional note following talks with senior executives from across IT hardware companies.

While IT spending has increased, particularly in enterprise tech, consumers are cautious and we face a series of big risks, including war, supply chain challenges, the pandemic and inflation.

For freight and logistics, new headwinds from the Russia/Ukraine conflict are likely to keep costs elevated through 1H22, as oil prices rise and logistics routes are disrupted. They also anticipate component and credit risk problems as trouble generated by the conflict echoes across wider international economies.

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