By Neil Hughes
Published: 08:00 AM EST (05:00 AM PST)
Though it still recommends the stock to investors, Morgan Stanley this week removed Apple from its "Best Ideas" list, citing the company's outperformance of the market over the last six months.
However, analyst Katy Huberty noted that AAPL remains a "top pick" due to long-term growth potential for the company. But Apple is no longer on the company's "best ideas" list, because it was up 28 percent over the last six months, while the S&P was up 14 percent.
Huberty said that in the last half-year, the gap between her estimates and Wall Street consensus has narrowed, which contributed to the stock being removed from the list.
AAPL was named a "Best Idea" for investors by Morgan Stanley
this May, highlighting the stock as one of the best options on Wall Street. It was a major turnaround for Huberty, who was
notoriously negative on the company's stock, suggesting the iPhone was too expensive even at a $199 subsidized price.
Still, this week Huberty said she sees four key long-term growth drivers for the company's stock. They are:
- Smartphone market growth and expanded iPhone distribution
- The tablet market opportunity
- Rising enterprise adoption
- The Chinese consumer
She also disagrees with some investor concerns that Apple's margins may have peaked. The company has
warned investors that its gross margins will continue to decline due to aggressive pricing on new products like the iPad and MacBook Air.
"We believe Apple will limit major iterations to its product line in (calendar year 2011) in order to flow component cost and manufacturing yield/volume benefits through to the bottom line," Huberty wrote. "As a result, we see upside to both (calendar fourth quarter 2010) and (calendar year 2011) gross margin expectations."
The analyst expects an iPhone on the Verizon network in early 2011, a new, lower priced iPad in April, and the iPhone 5 in June 2011. She also predicts a "smart TV," redesigned iPad and 4G LTE iPhone from Apple all in 2012.
