By Sam Boughedda
Analysts at Morgan Stanley remain positive on Apple (NASDAQ:AAPL) despite the current near-term challenges, they said in research notes on Friday.
KeyBanc analysts told investors in a note that the company is maintaining its Overweight rating and $177 price target on Apple shares.
They explained that the firm recommends looking past near-term supply challenges as user growth is greater than unit growth.
"KFLD [Key First look Data] shows Indexed Spend -14% m/m Nov. vs. +12% 3-yr. avg., building upon Oct. weakness. China supply issue is likely impacting results; consequently, we take down iPhone unit ests. 7.3M, driving our ests. lower, with bearish assumptions suggesting 6M-10M iPhone units lost due to production. Positively, supply chain diversification over time should reduce risk LT and makes us discount the present; some demand may shift to later quarters," they wrote.
Morgan Stanley analysts said that while near-term iPhone supply disruption is capturing the majority of investor attention, Apple's core drivers - IB and spend per user growth - remain intact, keeping the firm Overweight.
"While most investors are focused on near-term supply disruption, we believe this overlooks the strength and health Apple's ecosystem, where we remain bullish. Apple has captured a number of headlines in recent weeks, ranging from iPhone production shortfalls in China, supply chain geographical diversification, a pivot in the Apple Car strategy, new App Store pricing tiers, and updated security and data privacy features, amongst other topics, resulting in an influx of investor questions. iPhone production disruption in Zhengzhou, China, and the impact it'll have on the December quarter has been the topic capturing the majority of investor attention," explained the analysts.
"While we acknowledge near-term supply disruptions remain a headwind to growth, and recently cut our Dec Q iPhone estimates (again) by 3M units (to 75.5M), we believe investors continue to under-appreciate the strength of Apple's ecosystem," they added.