Morgan Stanley Raises Apple's Price Target On Video Optimism

For the second consecutive day, a major Wall Street firm raised its price target for Apple, Inc. AAPL ahead of the iPhone event scheduled for Sept. 12.

The Analyst

Morgan Stanley analyst Katy Huberty reiterated her Overweight rating and raised her price target for Apple from $232 to $245.

The Thesis

According to Huberty, video will provide the next major growth leg for Apple Services revenue starting in 2019. Apple is investing $1 billion in video content, including 24 shows and partnerships. Huberty said video will add 2 percent annually to Services revenue growth. While video will be dilutive to earnings in the medium-term, she says it will be accretive in the long-term.

Huberty values Apple Video at $4 billion-plus and said the company will likely focus on more targeted content than Netflix, Inc. NFLX or other popular streaming platforms.

“On a stand-alone basis, we forecast that an Apple Video streaming service with high quality but limited breadth could be priced at the low end vs. competitors, or $7.99/month,and reach over 50M paid subscribers by 2025, compared to 124M at Netflix (current paid streaming subs) and Apple's >650M unit iPhone installed base,” Huberty wrote in a note.

She estimates an Apple Media bundle of Apple Music and Apple Video could grow into a $37 billion revenue stream by 2025.

Morgan Stanley’s price target hike comes just one day after Canaccord Genuity raised its target for Apple from $220 to $250.

Price Action

Apple traded lower by about 1 percent Wednesday morning to $226.14.

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