App Store on iPhoneSource: iMore

What you need to know

  • Morgan Stanley has raised its Apple target share price.
  • Katy Huberty says that strong App Store performance is the key.
  • She believes high engagement spurred by the pandemic could become the "new normal".

Morgan Stanley analyst Katy Huberty has raised her target Apple share price to $340, citing strong App Store performance.

As reported by AppleInsider:

Investment bank Morgan Stanley has raised its Apple price target to $340, citing strong App Store performance and a broader upside to Services.

In a research note seen by AppleInsider, analyst Katy Huberty estimated that App Store net revenue grew 39% year-over-year in May 2020, marking the strongest growth in that sector since April 2017 and an 8 point acceleration from April 2020.

Based on that, the analyst has raised Morgan Stanley's June quarter growth estimate to 32% year-over-year, which assumes that App Store growth will slow to 20% compared to the year before in that month. With the rest of Morgan Stanley's Services forecast unchanged, the investment bank is also estimating that Services as a whole will see 16.7% growth in the June quarter, up from the 12% predicted previously. Huberty adds that there's more than $500 million of App Store upside.

It seems that COVID-19 and lockdown orders have proven to be a "tailwind" to the app economy. Morgan Stanley previously stated April would mark the "peak" of this boom, however, it now says that the strong performance could become the "new normal." The example? China. Despite being "furthest along the recovery path", net app revenue in the country is continuing to accelerate, suggesting the growth is sustainable. Huberty expects growth in China to climb again next month barring "any unexpected changes" in consumer behavior.

On the App Store's performance alone, Morgan Stanley raised its Service Revenue forecast to $54.1 billion in 2020, and $63.7 billion the following year.