Why Apple Remains Morgan Stanley's Top Pick For 2018

After a 50-percent gain throughout 2017, some among Wall Street are optimistic that Apple Inc. AAPL's investors will continue seeing strong growth throughout 2018.

The Analyst

Morgan Stanley's Katy Huberty maintains an Overweight rating on Apple's stock with an unchanged $200 price target. Morgan Stanley named Apple as its "top pick" entering 2018.

The Thesis

At a time when some media reports are saying that Apple is losing ground in the lucrative Chinese smartphone market, Huberty detailed in late November compelling data from China that suggests otherwise. (See the analyst's track record here.)

Huberty covered new data that reaffirms the company's strong positioning in China in a Thursday note.

iPhone X adoption rates in China are "on a faster pace" than the iPhone 8 or iPhone 8 Plus, Huberty said. Specifically, the iPhone X represented 0.36 percent of the iPhone installed base in China through Nov. 19, which is even more notable when including the fact that the data includes only 16 days of iPhone X availability, while the iPhone 8 and iPhone 8 Plus have been available for 28 days.

"Significant pent-up demand" remains from Chinese iPhone users who still own models that are at least two years old, the analyst said.

Apple is one of only two smartphone brands in China that boasts a positive switching rate in the past four-week period, and some of its biggest domestic rivals — Huawei, Oppo and Vivo — are all cutting their own smartphone orders by over 10 percent due to weaker-than-expected demand, according to Morgan Stanley.