Apple Services ‘more at-risk than ever before,’ says Morgan Stanley

Morgan Stanley says Apple’s (AAPL) “opaque” June quarter Services guidance and recent, cautious legal headlines are “fueling more debate than ever” over the risk to the company’s Services growth. The firm believes recent legal losses could pressure U.S. App Store take rates while changing search habits and regulatory forces threaten Apple’s $20B digital advertising revenue, putting 50% of the company’s highest-margin Services businesses “more at-risk than ever before.” However, at the same time, these concerns have resulted in investor sentiment “turning overwhelmingly negative,” contends Morgan Stanley. The firm points that both these risks are “longer-tailed” and Apple has possible catalysts ahead such as improving U.S/China trade relations and its developers conference. Morgan Stanley keeps an Overweight rating on Apple with a $235 price target