Shares of Apple AAPL jumped over 2.5% Monday morning in continuation of their strong post-earnings release momentum. Now a Morgan Stanley MS analyst sees huge upside for Apple stock based on the tech power’s ability to roll out new services in 2019, which includes its streaming TV platform that aims to take on Amazon AMZN and Netflix NFLX.
Morgan Stanley analyst Katy Huberty expects Apple to debut its video streaming service this spring. This standalone streaming service is set to challenge the likes of Amazon Prime, Netflix, along with Disney DIS and AT&T T, with offerings from big-name Hollywood stars both in front of and behind the camera. Huberty also suggested that Apple is set to sell a media bundle that will include its video streaming service, Spotify SPOT competitor Apple Music, and its Texture news app—that has been called the Netflix of magazines.
The analyst also dove into the company’s ability to expand its advertising unit and its payment business in the growing fintech market along with the likes of Square SQ and PayPal PYPL. Huberty slapped a $211 price target on Apple, which marked a 27% upside to Friday’s closing price of $166.52 a share.
Furthermore, Morgan Stanley sees Apple expanding its stock buyback program to help return more value to shareholders. “After repurchasing $8.8 billion of stock in the December quarter, below the prior $20 billion run-rate, we see a more active buyback program helping re-rate shares, as investors better understand the stabilization path for iPhone and impact of new services,” Huberty said.
Shares of Apple have now climbed over 16% since Christmas, along with fellow giants Facebook FB, Google GOOGL, and much of the rest of the market.
Apple saw its revenues fall 4.5% in its recently reported quarter. Despite the downturn, Apple topped Wall Street’s greatly subdued top and bottom-line estimates for Q1 fiscal 2019. On top of its holiday-quarter sales decline, Apple’s iPhone revenues plummeted 15% and sales in Greater China tumbled 27%.
Going forward, Apple is set to face an extended period of more difficult year over year comparisons for its core iPhone business. But Apple’s services revenue surged 19% in Q1 to reach $10.9 billion. And Morgan Stanley expects Apple’s new media bundle could add roughly 2% points annually to services revenue growth through 2025, which would help drive a 5% annual revenue growth rate and 12% for earnings through 2023.
At the moment, our Zacks Conesus Estimate calls for Apple’s Q2 revenues to sink nearly 6% to $57.5 billion. Plus, Apple’s adjusted Q2 earnings are projected to plummet 12.82%. Meanwhile, Apple’s full-year 2019 revenues are projected to dip 4.2%, with earnings expected to slip 4.4%.
Apple appears to be headed for a slight downturn in 2019 on the back of slowing iPhone sales and poor sales in Greater China. Yet, at least one analyst thinks that Apple’s services business is set to boost the company in a big way, propelled by its new streaming TV service.
Let’s also not forget that Apple could roll out a game-changing product no one sees coming and CEO Tim Cook is confident that Apple Watch-style health offerings will be legacy-shaping.
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