Morgan Stanley’s Highest Conviction Stocks: Top 20 Stocks To Buy

8. Apple Inc. (NASDAQ:AAPL)

Share Price Upside: 21%

Number of Hedge Fund Investors In Q2 2024: 184

Apple Inc. (NASDAQ:AAPL) is the world’s largest technology company in terms of revenue and market capitalization. Its $3.4 trillion valuation is driven by Apple Inc. (NASDAQ:AAPL)’s bread and butter product, the iPhone, its tight ecosystem that drives complementary and other product sales, and technological and design strengths that focus on aesthetics as well as hardcore engineering such as semiconductor design. For the nine months ending in June, $155 billion of Apple Inc. (NASDAQ:AAPL)’s $296 billion in revenue was from iPhone sales. This makes the iPhone upgrade cycle a key tenet of Apple Inc. (NASDAQ:AAPL)’s hypothesis, as analysts and investors place their faith in strong product design and ecosystem capture making iPhone users stick with the lineup when they choose to upgrade. Another key pillar of the hypothesis is the Services business division which accounted for $72 billion of revenue during the nine month period. Apart from products such as the App Store, Services also include revenue from payments made by Google to Apple Inc. (NASDAQ:AAPL) to offer Google’s Search on its products, and anti trust action against Google or other legal actions could spell trouble.

Polen Capital mentioned Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter. Here is what it said:

“Apple re-emerged as a top performer in the second quarter. The company reported better-than-feared results in its iPhone segment that quelled concerns over weakness in China. Additionally, the company forecast a return to sales growth and announced a $110 billion stock buyback plan, the largest in U.S. history. Later in the period, at its Worldwide Developers Conference, Apple introduced long-awaited new AI features that spurred some optimism around an upgrade cycle for the iPhone and, more generally, the important role Apple may be able to play in the emerging AI landscape. We continue to study Apple closely, which we previously owned the company for many years during its growth phase, to determine if it is poised for another significant revenue and earnings growth period.”