With shares of Apple just on the verge of breaching the $100/share mark -- and setting an all-time high in the process -- Morgan Stanley analyst Katy Huberty this week put out a research note detailing a number of reasons why the time is ripe to invest in Apple. Though shares of Apple have been on a rampage as of late, Huberty still believes there's much room for growth ahead.
The report was obtained by Fortune and some of the highlights are as follows:
For starters, Huberty writes that institutional ownership of Apple shares is much lower than it was back in 2012. The subtext here is that there is plenty of room for large hedge funds and the like to shore up significant positions in Apple.
Specifically, Huberty points out that institutional ownership of Apple shares currently stands at just 2.3%. This is in stark contrast to the scenario in 2012 when institutional ownership of Apple was at its zenith at 4.5%
Huberty also references Apple's capital return program which, to date, has already returned $74.5 billion to shareholders in the form of stock buybacks and dividends. Indeed, one could make a strong case that Apple's capital return program played an instrumental role in reviving stagnating shares of Apple. Not only do stock buybacks help pump up the company's quarterly EPS, but issuing dividends also opened up the stock to investment firms and funds who are exclusively beholden to stocks that issue dividends.
Huberty also brings up Apple's R&D expenditures as a reason why the company's future looks bright. In fact, just last month we highlighted that Apple spent a record amount on R&D during the company's June quarter. Year over year, R&D expenditures increased by 36%.
Commenting on this at the time, analyst Walter Piecyk observed that the last time Apple's R&D as a percentage of net sales was as high as it is today was before the original iPhone launched.
$AAPL R&D was over 4% of revenue. It hasn't been that high since 2006, before the first iPhone launched.- Walter Piecyk (@WaltBTIG) July 22, 2014
Make sure to head on over to Fortune for a full recap of Huberty's report. There's not anything terribly surprising in there but she does provide a nice summary highlighting the myriad of reasons why Apple, going into 2015, is poised for big things.
And speaking of high expectations, Huberty isn't the only one anticipating big things for Apple. Recall that Apple executive Eddy Cue during this year's Code Conference said that Apple's 2014 product pipeline is the best he's seen in his 25 years at Apple. Those are some unusually telling words coming from an Apple executive, and all the more tantalizing given that Cue was around for the launch of the iPhone.
As a final point, Fortune points out that Morgan Stanley from March through June of this year added 2 million shares of Apple to their holdings, bringing their entire investment in Apple to $3.8 billion.