As Apple rebounds from its first earnings call predicated with a guidance revision in 16 years, many analysts remain skeptical of the company’s ability to regain its trillion-dollar status. Morgan Stanley analyst Katy Huberty, however, has a different take, via CNBC.
Huberty believes that if Apple successfully launches a so called “media bundle” in 2019, comprised of music, television streaming and a Texture news subscription, the company will see significant growth as the bank currently targets AAPL’s 12 month share price at $211.
For reference, AAPL closed at just over $166 on Friday with a $785 billion market cap. When the company hit its initial $1 trillion value, shares were approximately $206 each.
Specifically, the bank estimates that a media bundle could add 2% annually to Apple’s services revenue through 2025 “helping to drive a 5 percent revenue and 12 percent earnings per share (EPS) annual growth rate through 2023”.
Morgan Stanley also forecasts an increase in buybacks, with Huberty adding,
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.
As for the alleged media bundle, rumors of the sort have swirled in the past. In June of 2018, a report via The Information claimed Apple was mulling the same all-in-one subscription service for music, TV and news.
On Tuesday, Apple announced its Q1 2019 earnings, which encompassed the holiday season. The company reported $84.3 billion in revenue and $19.97 billion in profit. For comparisons sake, $88.3 billion in revenue and $20.1 billion in profit was reported in Q1 2018.
For those unfamiliar, Apple purchased the digital magazine service Texture in March of 2018, which has been dubbed as a $9.99 a month ‘Netflix for magazines’.
Finally, Huberty marked iPhone replacement levels at “mature levels”, saying,
iPhone replacement cycles now stand at mature levels suggesting a stabilization of growth is in the cards over the next year. [Apple’s] commentary that demand improved in January is similarly encouraging.
Previously, Morgan Stanley predicted in the days prior to Apple’s earnings call that since expectations were already so low, there would be no better time to invest in the stock.
In December, Bloomberg reported on Apple’s plans of launching a new, paid news subscription service based upon Texture built-into Apple News in Spring 2019, however, publishers have reportedly been wary to join.
Are you equally as optimistic of Apple launching an all-in-one services bundle this year? Let us know how you feel about the possibility in the comments section below!