Morgan Stanley has lifted its price target for Apple Inc (NASDAQ:AAPL) and raised its earnings forecasts for the tech giant in the wake of the launch of the iPhone X.
In early New York trading, Apple shares were up 0.3% at US159.20.
The banking giant says the key takeaway from the recent product launch is an uplift across the product line of the average selling price.
It may sound counter-intuitive, but Morgan Stanley reckons that for Apple zealots, the higher the price, the higher the demand.
Furthermore, as the smartphone market matures, the loyalty rate of Apple customers is on the rise.
According to Morgan Stanley’s April 2017 AlphaWise US Smartphone survey, 92% of US iPhone users who plan to upgrade their phone in the next year plan to repurchase an iPhone, up from 86% the year before.
MS foresees price increases on other products in the iPhone line
International users are similarly besotted, with an average loyalty rate of 86% against 61% for Samsung in the same markets.
“An aspirational brand, high customer loyalty and weaker dollar allow Apple to increase prices without hurting demand”, Morgan Stanley (MS) said, as it increased its price target to US$194 – still cheap compared to an Apple iPhone X(pensive) – from US$182.
MS said the starting price of US$999 for the iPhone X was US$50 higher than it had expected.
It foresees price increases on other products in the iPhone line, as well as on other gizmos such as the Apple Watch and Apple TV, where prices are predicted to be US$30 higher than previous generations of those products.
Its revenue forecast for fiscal 2018 therefore rises to US$301bn from US$288bn, putting it some 14% above the market consensus of US$263bn.
“China remains a key driver of our above consensus estimates, where the number of iPhones due to be upgraded grew 56% this year setting up for a powerful upgrade cycle,” MS said.
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