Morgan Stanley Slightly Increases Apple Stock on Strong iPhone Demand Should You Buy AAPL Here?
Apple ( AAPL ) has received its fair share of criticism in the past when it comes to the iPhone. From cycles of slow growth to reduced demand, the market has punished the stock without hesitation. But every time the iPhone maker looks like it’s on a roll, it bounces back. A recent note from Morgan Stanley analyst Erik Woodring shows just how much confidence the company has in AAPL stock. And it has the numbers to back up its bullish thesis.
The investment firm’s latest AlphaWise Smartphone Survey for 2025 shows development rates in China increasing by nine points YoY. Global iPhone development has never been as high as it is now, while the rate of switching to Apple has also reached a five-year high. On top of all this, 27% of survey participants showed interest in a foldable iPhone. Bank of America Securities has already predicted sales of 20 million of the foldable iPhone, when it is introduced soon. Morgan Stanley now forecasts iPhone revenue growth of 6% in FY26, compared to the Wall Street consensus of 3%.
Apple designs and manufactures devices and accessories such as the iPhone, iPad, Mac personal computers, tablets, home appliances, and wearables. It also offers various services like AppleCare and App Store. The company is based in Cupertino, California.
AAPL stock has roughly matched the performance of the broader market over the past 12 months. During this period, it provided returns of 13.35% compared to the S&P 500 Index’s ($SPX) 16% returns. If analyst sentiment is anything to go by, the stock may outperform the market over the next 12 months.
Apple trades at a forward P/E of 29.12x, very close to its five-year average of 28.7x. If one considers this valuation in the context of Morgan Stanley’s report, it seems that the market is yet to pay a price for the growth of the iPhone. Morgan Stanley believes the foldable iPhone will be a positive and boost to FY27 iPhone revenue. Its ratings are 4% above consensus, which is an extremely strong position and deserves a valuation premium.
The above estimates are not included in the consensus earnings growth of 9.5 percent in FY27. Once analysts start putting in improved numbers for iPhone growth, this revenue growth number could improve significantly. Wall Street expects the company to grow its earnings by 11.21% in 2028 and 20.09% in 2029. The revenue landscape could change dramatically if the foldable iPhone hits hard.
Apple reported its Q1 2026 earnings on Jan. 29. Net income of $42.1 billion was a significant improvement from $36.33 billion in the same period last year. Sales in China, Taiwan, and Hong Kong increased 38% during the quarter. iPhone revenue was $85.27 billion versus expectations of $78.65 billion, while Services segment revenue of $30.01 billion fell just below consensus of $30.07 billion. Net income grew slightly from 47.5% last year to 48.2% this quarter.
CEO Tim Cook has called iPhone demand phenomenal. The number of people upgrading their phones in China has reached an all-time high. While demand is expected to remain strong, executives indicated that rising memory prices and improved node availability led to sequential guidance. Having said that, gross margins are expected to remain within 48% and 49% for the ongoing quarter.
AAPL stock has an absolute price target of $295.90 on Wall Street, suggesting a 17.5% upside from here.
Apart from Morgan Stanley, other research firms also reiterated their positions on the stock. On March 23, Bank of America Securities reiterated its “Buy” rating, although it revised its target price from $325 to $320. Earlier in the month, analysts from Citi, Bernstein, Goldman Sachs, Evercore ISI, and Wedbush Securities also reiterated their stance. Wedbush Securities’ Daniel Ives currently has a high price target of $350 on the stock, indicating about a 40% upside from current levels.
As of the date of publication, Jabran Kundi had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com
