Morgan Stanley Breaks Down Its Best Ideas: Apple, Amazon And More

Morgan Stanley came out with their best ideas in North America. All of the picks are outlined below, but of these, the firm sees the most upside in Steel Dynamics (+61 percent), Michael Kors (+57 percent), Amazon.com (+44 percent) and Salesforce.com (+41 percent).

Here is a highlight of Morgan Stanley’s arguments:

Amazon.com, Inc. AMZN: Katy Huberty believes that the low institutional ownership and potential to increase EPS through lower investment are catalysts that will drive the price higher. Price target is $420.

Apple Inc. AAPL: The iPhone is in the midst of a “super upgrade cycle” that will drive new purchases over the next two years. In addition, pessimism about the Watch will prove faulty. Price target is $126.

Canadian Pacific Railway Limited CP: Story is turning to a “structural growth play.” Free cash could lead to a 5-10 percent share buyback, driving EPS growth to the high teens by 2018. Price target is C$278.

Delphi Automotive PLC DLPH: Among global auto suppliers, Morgan Stanley notes that Delphi is best of breed and is positioned to become a “mega supplier,” leading to revenues that grow twice what the industry does. Price target is $90.

Macy’s, Inc. M: Morgan Stanley said that Macy’s management is on the right track to deliver long-term sales growth with three main initiatives. Despite that, its valuation is inexpensive versus its peers. Price target is $70.

Michael Kors Holdings Ltd KORS: Kors trades below its five-year average, the only stock on Morgan Stanley’s list to do so. The management here is strong as well, with leadership finding new avenues for revenue growth. Price target is $105.

Prudential Financial Inc PRU: Translating peer multiples to Prudential’s stats, Morgan Stanley comes up with a price target of $102. However, there are some risks, including higher capital requirements and adverse currency fluctuations.

salesforce.com, inc CRM: Salesforce is positioned in key secular trends, including mobile, Internet of Things and cloud computing, according to analyst Keith Weiss. As the company sustains mid-20s top-line growth, it will be able to forge a clear path to 30 percent operating margins. Price target is $80.

Steel Dynamics, Inc. STLD: Morgan Stanley is most bullish on Steel Dynamics relative to current price. The company notes that recent declines in steel prices matter less than margins, which Steel Dynamics can support based on scrap metal prices falling relatively faster than steel. Price target is $28.