Apple is most 'under-owned' large cap tech stock, Morgan Stanley says
Shahid Jamil/iStock Editorial via Getty Images
Following second-quarter data, investment firm Morgan Stanley said on Wednesday that Apple (NASDAQ:AAPL) has become the "most under-owned" large cap-tech stock that it tracks, surpassing Microsoft (NASDAQ:MSFT).
A team of analysts, led by Erik Woodring, noted that under-ownership of the mega-cap tech stocks was largely "unchanged" exiting the quarter, with the spread at minus 82 basis points compared to the S&P 500, while the rest of large-cap tech was a positive 20 basis points.
For Apple (AAPL), the active institutional portfolio weighting in the second-quarter fell 26 basis points to 5.51%, while the weight in the S&P 500 increased 65 basis points to 7.72%, accounting for the 2.21% spread. 
"We believe this is a reflection of the significant weighting Apple has in market indices, especially after outperforming the market [year-to-date] by 30 points at the peak in late July, as well as investor concerns about the divergence between valuation ... and near-term fundamentals (guidance for F4Q suggests revenue will decline [year-over-year] for the 4th consecutive quarter)," the analysts wrote in an investor note.
The analysts added that Apple (AAPL) is more under-owned than at any time in the firm's history of data and the most under-owned at any point since 2008.
Additionally, the analysts noted that while demand for the Mac and iPad are still "challenged," the firm is encouraged that the September quarter is likely to see growth in the "right places," with year-over-year growth in the iPhone, an acceleration in Services revenue and gross margin tailwinds. 
"As a result, we see 5% upside to Street EPS estimates in [fiscal 2024], and expect the stock to outperform as growth accelerates, margins expand [year-over-year], and consensus estimates move higher," the analysts added. 
For Microsoft (MSFT), which is Morgan Stanley's top pick in large cap software, the firm noted that the weighting in an active institutional portfolio increased by roughly 66 basis points sequentially to end the quarter at 4.6%, while it accounts for a 6.8% weighting in the S&P 500, up 78 basis points. 
The firm sees Microsoft's (MSFT) position in public cloud and generative artificial intelligence as differentiators, along with its "unique ability" to bring together consolidated solutions, gain market share and outperform against Wall Street expectations. 
"Easing compares, price increases, waning FX headwinds and decelerating opex all work to accelerate EPS growth into FY24," the analysts wrote. "This dynamic should bring investors back to Microsoft, given strong stock performance historically aligned to EPS growth and a broader market backdrop where earnings outside of software look to be coming under increasing pressure." 
Conversely, Meta Platforms (NASDAQ:META) saw its ownership gap compared to the S&P 500 widen than its other big tech brethren in the second-quarter, with the average portfolio concentration of the top 100 shareholders increasing roughly 100 basis points.
Meta's active ownership weighting was roughly 60 basis points above its weighting in the S&P 500.
For comparison, Amazon (NASDAQ:AMZN) and Google (GOOG) (GOOGL) ownership declined 10 and 30 basis points, respectively. Active ownership weightings for both were roughly 20 basis points below their respective weightings in the S&P 500.
The firm also weighed in on several other large-cap tech stocks, including Adobe (ADBE), Salesforce (CRM), Intuit (INTU), Qualcomm (QCOM), Intel (INTC), Broadcom (AVGO), Nvidia (NVDA), Oracle (ORCL), Cisco (CSCO) and IBM (IBM).
Stocks that saw increases in active portfolio weighting include Adobe, Broadcom, Nvidia, Oracle, Cisco and IBM. Conversely, Salesforce, Intuit, Qualcomm and Intel all saw sequential declines.

More on Apple, Microsoft and more

Amazon Stock: Buy The Dip To Catch The Next Rip
Top 3 AI Stocks: Buy The Dip
Apple: Will Vision Pro Re-Ignite Its Growth?
Microsoft: Sizing Up The AI Opportunity
Microsoft purchase of Activision likely to close in early October - report (update)
Amazon rises as Wedbush adds to Best Ideas List on 'stabilizing' growth
Compare metrics for AAPL to AMZN, META, MSFT