Apple’s long-term positives outweigh rare earnings miss, Morgan Stanley says

Shorter-term macro points do not detract from the long-term worth at Apple, Morgan Stanley analysts wrote in a word Friday that reiterated an obese score and a $175 value goal.

“Taking a step back, it’s rare to see Apple miss and guide down in a quarter, but we believe the long-term positives from tonight’s report outweigh the short-term negatives,” Morgan Stanley’s Erik Woodring wrote. Apple’s Thursday evening earnings report cited a robust greenback, continued manufacturing points in China, and the broader macroeconomic atmosphere as three causes for Apple’s first year-over-year gross sales decline since 2019.

“On the third factor, I would say was just the challenging macroeconomic environment, and you’re hearing that from, I would think, everybody,” CEO Tim Cook advised CNBC’s Steve Kovach.

But Morgan Stanley assesses these headwinds as transitory, noting each accelerated development in iPhone put in base and a continued upward margin trajectory as longer-term upside which is able to guarantee “the Apple flywheel keeps spinning.”

Morgan Stanley reiterated its prime choose score for Apple. The firm has managed to navigate a broader tech downturn with appreciable success and is likely one of the few tech corporations that has staved off layoffs and maintained a stage of operational expense self-discipline.

It’s that very same self-discipline that helps Morgan Stanley analysts keep a bullish outlook on Apple, which guided to a March 2023 gross margin starting from 43.5 to 44.5%, in keeping with the word.

“We believe Apple’s ability to post the highest gross margin in a decade despite seeing revenue decline Y/Y is impressive, and moving forward, we expect gross margins to improve as mix, FX, commodities, and logistics all work in Apple’s favor through the rest of 2023 and into FY24,” Morgan Stanley’s word stated.

Apple’s person spend ranges are additionally retaining Morgan Stanley bullish, proof that “the underlying drivers of Apple’s model remain robust.”

Investors have apparently embraced Morgan Stanley’s appraisal of Apple’s sturdiness as a long-term funding. Apple shares had been up round 1% on the open Friday, regardless of the gross sales miss, recouping losses from a 4% drop Thursday evening. The firm additionally reported misses on the highest and backside strains, beating analyst expectations solely in iPad and companies income.

— CNBC’s Michael Bloom contributed to this report.