When it comes to Apple’s “moat trend,” Morningstar is of two minds.
From analyst Abhinav Davuluri’s Why We’ve Downgraded Apple’s Moat Trend:
After taking a fresh look at our thesis on Apple, we are reducing the firm’s moat trend from positive to stable, while maintaining our $175 per share fair value estimate and narrow-moat rating. We still view switching costs around the iOS ecosystem as Apple’s primary moat source, and while we believe such costs remain strong today, we don’t necessarily believe these switching costs are strengthening, thus the shift to stable.
Maintains fair value of $175.
My take: It’s easy to imagine a moat having width and depth. It’s harder to picture “moat trend”—not without some heavy earth-moving equipment. What’s weird is that only three trading days earlier Morningstar had rated Apple’s moat trend as positive. Cue the video:
As for Morningstar’s $175 “fair value,” I’ve come to see that number as today’s buy target for the buy side rather than next year’s price target for the sell side.