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Apple Stock Still Has Plenty Of Room To Grow

Apple is the most heavily owned tech stock among the top 100 institutional investors

Apple Stock AAPL

Apple Inc. (NASDAQ:AAPL) shares have skyrocketed more than 58% in the last 12 months. The stock gained 1.78% to $116.71 on Thursday. Despite the stock reaching a record high, Morgan Stanley analyst Katy Huberty believes that Apple still has plenty of room to growth. In a research note to investors, Huberty said that Apple portfolio allocation among top institutional investors increased during the third-quarter. But it remains well below the tech giant’s S&P 500 weighting.


Institutional ownership remains below Apple’s weighting in S&P 500

That’s an attractive setup, says Huberty. It will make the recent rally more sustainable. At the end of Q3, the top 100 institutional investors had allocated 2.5%, on average, of their portfolio to Apple, up from 2.3% at the end of the second-quarter. This allocation is far below the Q3, 2012 peak of 4.5%, and lower than the company’s 3.8% weighting in the S&P 500 index.

Apple is the most heavily owned tech stock among the top 100 institutional investors, ahead of Facebook. The QoQ increase in institutional ownership of Apple stock is a positive trend, said Huberty. Institutional investors include pension funds, mutual funds, hedge funds and private equity firms. However, a recent report from Fox Business says that hedge funds dumped Apple stock in Q3 in favor of Alibaba Group Holding Ltd (NYSE:BABA).

BTIG raises its price target

Separately, BTIG Research increased its price objective on Apple from $128 to $135. The research firm also raised its FY2015 EPS growth forecast from 17% to 20%. BTIG expects Apple to sell 62.5 million iPhones during the current quarter, which include the crucial holiday shopping season. Though Apple has been facing supply shortages for its new iPhone 6 and 6 Plus due to strong demand, supply has improved meaningfully in the past few weeks.

Katy Huberty said Apple and Microsoft are the only two large-cap tech stocks whose institutional investor portfolio allocations are below their S&P 500 weightings. During the quarter, Amazon witnessed a decline in institutional ownership. Morgan Stanley has an Overweight rating on Apple. Earlier this week, the Cupertino company unveiled WatchKit software tools for developers to make apps for Apple Watch.

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