Apple CEO Tim Cook greets customers at the new Apple Store on Broadway.
In a note to investors on Tuesday, Morgan Stanley's Katy Huberty raised Apple's price target from $164 to $200 and maintained the equivalent of a buy rating, arguing that new products from Apple, like an augmented reality headset or self-driving car, aren't yet baked
Apple's shares were up in premarket trading.
The December quarter shipment forecast was increased by 3 million units to 83 million units, a 4% increase year-over-year, and she said Apple hasn't hit the same supply constraints it faced in the September quarter. The revenue of the App Store is expected to surpass initial forecasts.
As we get closer to Apple's products becoming a reality, we believe valuation would need to reflect the optionality of these future opportunities.
Over the last five years, Apple's stock price has increased 500%, driven largely by new products and services, and not from iPhone revenue, which has grown 40% over the same period, according to a note. Apple's services business has grown to nearly $70 billion annually and its accessories business contributes $38 billion annually.
Some of Apple's services, like the Apple Watch, and new products, like the AirPods, have been around for a while. She said that new products like an augmented reality headset, which could contribute as much to revenue as the iPad did in its first four years on the market, may present similar growth over the next five years, equating to about a $20 per share increase in Apple's share price today.
According to a report from the Taiwanese trade publication, Apple plans to increase production of the phone by 30% in the first half of the year. The shares of Apple suppliers saw a boost Tuesday morning. A report from last week said that Apple warned of a decline in demand for its products.
