Investing.com - Morgan Stanley insisted that Apple (NASDAQ:AAPL) remained a top pick for 2017 in IT hardware with several catalysts that could push its target price higher.
In a note to clients produced on Sunday, these analysts reiterated their overweight recommendation on the stock with a price target of $148.00, despite their cautious view on the industry.
“The market is focusing too much on near-term supply chain noise and not enough on three potential catalysts,” they explained.
Among their list of upside factors, they first referenced expectations for an “iPhone supercycle” led by China. They attributed recent weakness in Apple’s smartphone to pent-up demand ahead of “a major form factor change with significant technology enhancements, including improved battery technology”.
In reference to speculation that incoming President Donald Trump will move forward on fiscal policies to encourage cash repatriation, Morgan Stanley added that as the second potential catalyst for the stock as they calculated that Apple has $216 billion “trapped overseas”.
Trump could also directly affect the price of Apple’s stock if he follows through on promises for tax cuts among his fiscal policies, which these experts calculate to be as much as an 11 point reduction for the company.
Amid downside risks for the stock price, Morgan Stanley pointed to seasonally weak supply chain data points, U.S. trade policy reflecting the possibility of more tension between Trump and China or tariffs that hurt companies with offshore suppliers, a stronger dollar and possible gross margin headwinds due to recent strong execution on warranty costs and reduced depreciation.
“However, strong 7 Plus demand despite no form factor change and a $20 price increase suggests there is room for Apple to increase prices for AMOLED (active-matrix organic light-emitting diode display technology) iPhones next year," they concluded.