Morgan Stanley says Apple's 20% pullback is great time to buy before new iPhone release

Published Fri, Sep 25 20207:38 AM EDTUpdated Fri, Sep 25 20209:22 AM EDT

(This story is for CNBC Pro subscribers only.) Apple shares tumbled more than 20% from its record high in just a few weeks, and the pullback has created an attractive entry point ahead of the next iPhone launch, according to Morgan Stanley. "We view the recent pullback and more cautious hedge fund positioning as providing a constructive set-up heading into the iPhone 12 launch especially given fundamental data points remain strong," Morgan Stanley analyst Katy Huberty said in a note Friday. Shares of the tech giant have plunged 21.5% from their intraday record high of $137.98 from Sept. 2. A number of factors contributed to the sell-off, including a massive speculative run-up amid a stock split, a broad rotation out of high-flying tech leaders as well as a recent product event that disappointed some investors and analysts. Morgan Stanley sees Apple's accelerating reopening as a positive sign, especially ahead of the highly anticipated iPhone rollout. The bank said Apple reopened 30 stores on Wednesday alone, the highest one day reopening since mid-June. It brings Apple's total open U.S. retail stores to 446 out of 512, or 87%, the highest since the end of June. "With the iPhone 12 launch approaching, we believe it is critical that Apple has as many retail stores open as safely possible to support what we expect to be strong initial consumer demand for the new iPhone models," Huberty said. She also grew more optimistic after Apple supplier Jabil reported a strong earnings beat this week. Jabil, which is responsible for Apple's iPhone and iPad casing business, said the "out of season launch" and the "upcoming next-generation launch" are going "extremely well," Huberty noted. Morgan Stanley also remains bullish on Apple's Mac and Macbook lineup, which Huberty said should see a "strong demand." "Consensus currently forecasts Apple's Mac business growing just 14% Y/Y in the September quarter ... which we see as too low given strong consumer and education demand which is corroborated by extending lead times," Huberty said. Morgan Stanley has an overweight rating and a $130 price target on Apple, which represents a 20% gain from Thursday's close of $108.22. — CNBC's Michael Bloom contributed reporting.

Chinese customers look at iphones at the official opening of the new Apple Store in the Sanlitun shopping area on July 17, 2020 in Beijing, China.

Kevin Frayer | Getty Images

(This story is for CNBC Pro subscribers only.)

Apple shares tumbled more than 20% from its record high in just a few weeks, and the pullback has created an attractive entry point ahead of the next iPhone launch, according to Morgan Stanley.