Apple Inc. (NASDAQ:AAPL) Can’t Repeat 2012 Disaster: Morgan Stanley


Apple Inc. shares will not see the similar meltdown as was seen after the heavy rally in 2012. That’s the view Morgan Stanley’s Katy Huberty espoused in a note to the clients on Thursday. Huberty, who has an Overweight rating on the stock, believes this time it is different for Apple.


Different from 2012. Why?

“We acknowledge that with Apple building iPhone component inventory, supply chain data points are likely to be volatile as builds and shipments converge over time,” Huberty wrote. The analyst gives four reasons, why he feel this time is different from 2012/2013, when the stock saw a decline of around 40% in six months.

Firstly, gross margin for the firm is improving as Apple  moves towards the next iPhone cycle. Secondly, this time institutional ownership is less in the stock. Thirdly, the iPhone maker has more robust product line-up and a “stickier” ecosystem compared to rival Android. And lastly, Apple has a strong product and services roadmap.

Apple going strong in China

On concerns over China growth, Huberty writes “We don’t expect Apple to be fully immune to [a] weak China,” adding, “but we’d highlight smartphones over $300 taking share as a sign Apple is converting previously mid-market smartphone purchasers to their platform.”

Previously, some of the analysts expressed concern over the demand for the iPhones in China. In the 3Q, Apple sales in the region were up 87% from last year, but was down from the last quarter.

Apple’s senior vice president of Internet software and services, Eddy Cue believe the business in China is going strong. Speaking to CNBC on Thursday, Cue said the App Store hit a record transaction in July, with China contributing majorly with record customers.

“We are seeing more and more customers in China going to the App Store,” Cue said. The executive noted that the average spend per iPhone user in China is also rising. This is vital for the investors as it reflects the users in the region are spending more on the US firm’s products and services.

Cue also added that Apple  had around 1m developers in China, suggesting the firm’s effort to build its ecosystem is giving positive results.

Apple stock is down around 15% in the last month or so, which forced many analysts including Bank of America Merrill Lynch to downgrade the stock. On Thursday, Apple shares were up 0.22% at $115.13, and year to date the stock is up only over 2%.

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.

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