Analyst: Buy Apple Before iPhone 6 Launches

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A new research note issued by a prominent analyst on Friday suggested that this may be an opportune time to buy Apple (NASDAQ:AAPL) shares, reports AppleInsider. According to Morgan Stanley analyst Katy Huberty, ownership of Apple shares as a percentage of total funds at the top 100 institutions is at a historically low level. Per the research note obtained by AppleInsider, Apple is currently the only large-cap company in which institutional ownership has fallen below the S&P 500 weighting of 3.2 percent.

According to Huberty, the institutional investors’ reduction in Apple shares was prompted by a move from “hyper growth” stocks into “value” stocks, such as Hewlett-Packard (NYSE:HPQ) and Microsoft (NASDAQ:MSFT). While institutional ownership in Apple was waning, HP and Microsoft saw their share of institutions’ investment portfolios increase by 10 basis points from the December quarter to the March quarter.

Morgan Stanley’s data show that institutional investors are “significantly underweight” in Apple shares after reducing their stake in the Cupertino, California-based company from the December quarter through the March quarter. Interestingly, this means that most institutional investors reduced their stake in Apple ahead of the company’s nearly 16 percent climb following the iPhone maker’s strong late-April quarterly earnings report. Institutional investors may have been counting on a seasonal decline in Apple as consumers hold off on purchasing new devices in anticipation of product refreshes that typically arrive in the fall.

However, Huberty believes institutional investors will soon jump back into Apple stock ahead of the new product launches this fall that may include new product categories. The expected surge of reinvestment by large financial institutions and the likelihood of new products could drive up Apple stock even further. For this reason, Huberty is recommending that clients get into Apple ahead of a breakout. “We believe this sets up well for further share price upside heading into the iPhone 6 product cycle, iWatch launch, and potential new services,” wrote Huberty in the note seen by AppleInsider.

Huberty also believes that the upcoming iPhone 6 launch could be the biggest in Apple’s history. In a research note issued last month, Huberty cited supply chain sources that reported sales for the iPhone 6 were expected to be 20 percent higher than last year’s iPhone 5S launch, reports AppleInsider. Much of the excitement surrounding Apple’s next iPhone launch is centered on the anticipated increase in screen size. Multiple media outlets have reported that the iPhone 6 will be available in two larger screen sizes. Most sources peg the screen size of the smaller model at around 4.7 inches, while the larger-screen model is believed to feature a phablet-size screen of around 5.5 inches.

Although Apple has never confirmed the existence of an iWatch, several analysts have predicted that Apple will unveil the wrist-worn device this year, including KGI Securities analyst Ming-Chi Kuo in a “new product roadmap” obtained by 9to5Mac. Finally, the “potential new services” that Huberty mentioned in her research note are likely a reference to an expanded NFC-based mobile payments service that Apple is rumored to be unveiling alongside the iPhone 6.

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