On Monday, Morgan Stanley (NYSE:MS) reaffirmed its positive stance on Apple Inc. (NASDAQ:AAPL) shares, maintaining an Overweight rating and a price target of $273. The endorsement follows the findings from the firm's 2024 AlphaWise Smartphone Survey, which indicated an uptick in near-term iPhone upgrade rates in the United States and China.
The trend suggests potential growth beyond the forecasted flat year-over-year shipments and could lead to a 0.2-year increase in iPhone replacement cycles for the fiscal year 2025.
According to the survey, half of the iPhone users who are not planning to upgrade in the next twelve months cited the delayed rollout of Apple Intelligence as influencing their decision. Morgan Stanley projects that addressing these "pent-up upgraders" could raise global iPhone upgrade rates by at least three percentage points.
The adjustment could result in iPhone shipments reaching 271-313 million units in the fiscal year 2026, which is a 13% increase from the current base case estimate of 258 million units and aligns with the firm's bullish case scenario of 291 million shipments.
The survey's insights have bolstered Morgan Stanley's confidence in a multi-year iPhone upgrade cycle thesis. The firm anticipates that expanding the distribution of Apple Intelligence features and languages could accelerate iPhone replacement cycles and unit growth in the fiscal year 2026. As a result, Apple continues to be Morgan Stanley's top IT Hardware Pick, with expectations set high for the tech giant's performance in the coming years.
In other recent news, Apple Inc. has reported record-breaking total revenue of $94.9 billion for the final quarter of its Fiscal Year 2024, a 6% increase from the previous year. This substantial revenue was driven by a 6% growth in iPhone sales, which contributed $46.2 billion, and an unprecedented $25 billion in revenue from services, marking a 12% increase. The company also returned over $29 billion to shareholders through dividends and share repurchases.
In terms of future developments, Apple anticipates revenue growth in the low to mid-single digits for Q1 2025 and expects its services revenue to maintain its double-digit growth. The tech giant is also set to continue the rollout of Apple Intelligence, its new personal intelligence system, across various regions and languages, highlighting its commitment to integrating artificial intelligence within their products and services.
Apple has seen significant performance in emerging markets, setting revenue records in India. The iPhone remains the top-selling smartphone in several key markets, including the US, China, and the UK, and the company's services portfolio now boasts over 1 billion paid subscriptions. These recent developments underscore the company's ongoing commitment to growth and innovation.
InvestingPro Insights
Adding to Morgan Stanley's bullish outlook on Apple Inc. (NASDAQ:AAPL), recent data from InvestingPro provides further context to the company's financial position and market performance. Apple's market capitalization stands at an impressive $3.47 trillion, reflecting its dominant position in the technology sector. The company's P/E ratio of 37.52 suggests that investors are willing to pay a premium for Apple's earnings, possibly due to the anticipated growth in iPhone shipments and the potential impact of Apple Intelligence features.
InvestingPro Tips highlight Apple's strong dividend history, having raised its dividend for 13 consecutive years. This consistent dividend growth, coupled with a current dividend yield of 0.44%, may appeal to income-focused investors. Additionally, Apple's stock has shown a robust performance, with a 21.6% total return over the past year, aligning with Morgan Stanley's positive outlook.
It's worth noting that InvestingPro offers 15 additional tips for Apple, providing investors with a more comprehensive analysis of the company's financial health and market position. These insights could be particularly valuable for those looking to make informed decisions based on Morgan Stanley's upgrade cycle thesis and the potential impact of Apple Intelligence on future iPhone sales.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.