NEW YORK (TheStreet) -- Shares of Apple (AAPL) are climbing, up 0.26% to $127.83 in mid-morning trading Friday, after analysts at Morgan Stanley issued a positive note on the iPhone maker, saying the stock deserves a higher multiple due to its upcoming television service.
Apple is planning a TV package with about 25 channels by later this year, according to the Wall Street Journal. Therefore, Morgan Stanley says Apple should be viewed as a "platform" company, and its stock deserves a higher premium multiple.
The firm noted that if 8% of U.S. Apple users sign up for the service, Apple would potentially add 15 million subscribers. That means Apple could add an estimated $5.5 billion in revenue if the service is priced at $30 per month.
Morgan Stanley has the stock on its "Best Idea" list, and maintains its "overweight" rating with a $160 price target.
Cupertino, CA-based Apple designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, as well as a variety of related software, services, peripherals, networking solutions, and applications.
Insight from TheStreet's Research Team:
Apple is a core holding of Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Here is what Jim Cramer, Portfolio Manager & Jack Mohr, Director of Research - Action Alerts PLUS had to say about the stock in a recent alert:
The Wall Street Journal is reporting that Apple (AAPL:Nasdaq) plans to launch a Web TV service in the fall. Given Apple's growing TV ambitions over the past several years, combined with its announcement last week to offer HBO NOW in April, we believe an Apple TV streaming service will soon become a reality, as the WSJ article suggests. In our view, Apple is paving the way for grander ambitions in the TV market, as we believe ordering channels on an a-la-carte basis with HBO NOW or in smaller bundles through a streaming TV service will be the way of the future.
There's no question that the current pay TV model remains antiquated, expensive, over-bundled and in dire need of sweeping changes. In our view, Apple remains one of the few companies in the world that has the potential to truly transform the TV industry, and we believe that -- after nearly five years of whispers -- consumers are finally ready for a change. Last night's WSJ article suggested Apple would announce the new service in June and launch in September, with approximately 25 channels, including ABC, CBS and Fox. The article highlights a monthly price of approximately $30 to $40, above the $20 for Dish Network's (DISH:Nasdaq) competing Sling TV product. Unsurprisingly, the article points out that Apple's streaming service would not only be available on Apple TV but across other Apple devices using the iOS operating system.
We believe last week's unveiling of HBO NOW was an appropriate precursor for announcing a streaming TV product. We believe the potential of these two offerings pave the way for even bigger ambitions for Apple, with a full-blown Apple TV that allows the company to completely control the user's media experience. We reiterate our $150 target.
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Separately, TheStreet Ratings team rates APPLE INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate APPLE INC (AAPL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and notable return on equity. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results." You can view the full analysis from the report here: AAPL Ratings Report