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Morgan Stanley on Apple: 'Attractive setup into earnings'

Key Points
  • Apple is well-positioned heading into earnings next week, according to Morgan Stanley.
  • The firm maintains its overweight rating on Apple's stock and hikes its price target to $247 from $231.
  • "The combination of negative investor sentiment, the potential for a services acceleration in June, and a low bar for September guidance keep us positively biased into earnings," analyst Katy Huberty says.
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Despite unusually negative sentiment on Wall Street, Apple is well-positioned heading into next week's earnings report, Morgan Stanley said Monday.

The firm maintained its overweight rating on Apple's stock and hiked its price target to $247 from $231.

It's an "attractive setup into earnings," Morgan Stanley equity analyst Katy Huberty said in a note to clients. "The combination of negative investor sentiment, the potential for a services acceleration in June, and a low bar for September guidance keep us positively biased into earnings."

She said investor sentiment for Apple, which has a market value of about $932 billion, has been usually negative even though shares have bounded back about 20% from their May bottom.

Shares of Apple rose 2.3% on Monday.

Huberty expects third-quarter services revenue growth to accelerate for the first time since March 2018. She said this is "a key catalyst for regaining investor confidence in the Services narrative and multiple re-rating."

Huberty also said Wall Street's September quarter estimates "imply a low bar" for the stock, keeping Morgan Stanley bullish on Apple for the rest of 2019.

"We see multiple catalysts beyond earnings that make Apple a top pick into year end," said Huberty.

Shares of Apple have risen more than 8% in the past 12 months and more than 30% this year. Apple's earnings statement is expected after the closing bell on July 30.

—With reporting from CNBC's Michael Bloom.