Morgan Stanley Raises Price Target on Apple to This

Shares of tech giant Apple were on the rise on Tuesday after Morgan Stanley raised its price target on the company to $200 a share.

Analyst Katy Huberty raised the iPhone maker’s target from $164 to $200 and argued that new products from the company, such as an augmented reality or virtual reality headset, aren’t yet factored into the share price.

In a note to investors the analyst also maintained the equivalent of a buy rating on the stock.

Shares of Apple closed up 3.5% on Tuesday, reaching a new all-time high as Wall Street digested the price target boost.

Huberty also bumped her December quarter iPhone shipment forecast by 3 million units to 83 million units, a 4% increase year-over-year. According to the analyst, Apple hasn’t hit the same supply constraints it faced in the September quarter. She said App Store revenue is also set to outperform its initial forecasts.

“Today, we know that Apple is working on products to address two significantly large markets – AR/VR and Autonomous Vehicles – and as we get closer to these products becoming a reality, we believe valuation would need to reflect the optionality of these future opportunities,” Huberty wrote in a note to clients.

The note argues that the company’s stock price has increased nearly 500% over the last five years, driven largely by new products and services, and not from iPhone revenue, which has grown 40% over the same period.

She added that Apple’s services business has grown to nearly $70 billion annually and its wearables and accessories business contributes $38 billion annually.

Huberty said about 6% of Apple’s total revenue over the past five years has been generated by new products like AirPods, Apple Watch and some of Apple’s services, which didn’t exist five years ago.

The analyst argued that new products like an AR 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, on top of Morgan Stanley’s existing growth projections.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.