<\/p>\n
Apple’s (AAPL) newest iPhones may finally give investors a stronger reason to believe in the company’s artificial intelligence strategy.<\/p>\n
Morgan Stanley analyst Erik Woodring said Apple’s Sept. 9 product event showed a faster pace of hardware and software innovation than in recent years, led by its first foldable iPhone, new A20 chips, and a more capable version of Siri.<\/p>\n
“A little of the ‘old’ mixed with a lot of the ‘new’ as CEO John Ternus heralds the next evolution of the Apple story,” Woodring said in a research note shared with TheStreet.<\/p>\n
The event was also the first major showcase under Ternus since he replaced Tim Cook as CEO, putting him in charge as Apple tries to write a better AI story.<\/p>\n
Woodring pointed to the new iPhone Duo, Apple’s first 2-nanometer A20 chip, stronger-than-expected upgrades to the iPhone 18 Pro lineup, and enhancements to Siri.<\/p>\n
“In our view, today’s event previewed far more innovation than past years,” Woodring said.<\/p>\n
The larger opportunity may come from the millions of iPhone users still holding older devices.<\/p>\n
Morgan Stanley estimates that 57% of Apple’s iPhone installed base, involving roughly 690 million devices, is using a phone older than the iPhone 15 Pro. Meanwhile, 87% of the installed base cannot run the most complex Siri AI workloads.<\/p>\n
That comes as consumers are keeping their iPhones for more than four years, creating a large pool of older devices that could eventually be replaced.<\/p>\n
“We believe this pace of innovation — as well as price point premiumization — is likely to materialize in multiple years of above-trend growth, making an ‘Apple AI’ bull case now more feasible,” Woodring said.<\/p>\n
The analyst maintained an overweight rating and a $360 price target on Apple. Here’s what he sees.<\/p>\n
Apple enters new cycle after strong earnings<\/p>\n
Apple is entering the new product cycle after a strong fiscal third quarter.<\/p>\n
In July, the company reported revenue of $109.4 billion, up 16% from a year earlier, while diluted earnings per share rose 29% to $2.02. Both were June-quarter records.<\/p>\n
iPhone was a major driver. Revenue from the business jumped 22% to $54.25 billion, while Mac revenue climbed 29% to $10.35 billion and Services revenue increased 12% to $30.74 billion.<\/p>\n
Related: Bank of America resets Apple stock price target after iPhone Duo launch<\/p>\n
Apple’s installed base of active devices also “reached a new all-time high across all major product categories and geographic segments,” said Apple CFO Kevan Parekh in a press release.<\/p>\n
But investors were less impressed by the outlook. Apple forecast September-quarter revenue growth of 9% to 11%, implying a midpoint of about $113 billion, compared to the $114.9 billion analysts expected. Supply constraints still limit Apple’s ability to meet demand.<\/p>\n
The new iPhones and Siri AI could now help determine whether Apple can accelerate growth again into fiscal 2027.<\/p>\n
Shares of Apple are up 23% year to date, trading at $334.<\/p>\n
Getty Images<\/p>\n
Apple pricing strategy could help drive growth<\/p>\n
Morgan Stanley also sees an important shift in Apple’s pricing strategy.<\/p>\n
Apple raised the iPhone 18 Pro and Pro Max prices by $100 from last year, to $1,199 and $1,299, respectively. That was less than Morgan Stanley expected, given rising costs.<\/p>\n
“The relatively modest $100 like-for-like price increase suggests Apple is prioritizing upgrade volume and gross profit dollars over pure margin preservation,” Woodring said.<\/p>\n
Related: Cathie Wood buys $6.5 million of surging semiconductor stock<\/p>\n
Instead of relying only on higher prices for its newest phones, Apple also kept prices higher across older models rather than applying its traditional $100 price reduction after a new launch.<\/p>\n
Higher trade-in values, carrier subsidies of up to $1,200 and new leasing options could also make the more expensive devices easier for consumers to buy.<\/p>\n
Morgan Stanley believes Apple may be willing to accept some pressure on margins if that helps increase upgrades, keep users in its ecosystem, and push customers toward higher-storage models.<\/p>\n
Its supply-chain checks suggest calendar 2026 iPhone production could approach 270 million units, up about 7% year over year. More than 70 million iPhone 18 Pro models could be built in the second half, about 15% above comparable iPhone 17 Pro production last year.<\/p>\n
Related: Verizon scales back a perk that keeps prices low for customers<\/p>\n
AI remains another major part of Morgan Stanley’s bull case<\/p>\n
Apple has faced questions about whether it is falling behind rivals in the AI race. The new Siri, however, gave Woodring more confidence.<\/p>\n
“The biggest AI surprise was how aggressively Apple expanded Apple Intelligence beyond 1P applications and into real-world workflows,” Woodring said.<\/p>\n
Siri can now use information from messages, email, photos and apps to better understand what users are asking. Morgan Stanley was especially encouraged by Apple bringing those features to third-party apps.<\/p>\n
The analyst pointed to Siri’s ability to work with more than 300,000 third-party apps, as well as Safari alerts for product restocks and price changes and Health integration with Quest Diagnostics.<\/p>\n
Morgan Stanley said those features could help turn the iPhone into what it calls a “personal intelligence hub.”<\/p>\n
Shares of Apple are up 23% year to date, trading at $334 as of this writing.<\/p>\n
More on Apple & its stock: <\/p>\n
John Ternus’s net worth as Apple’s new CEO<\/p>\n
Tim Cook’s net worth: The retired Apple CEO’s wealth<\/p>\n
Who owns Apple? Institutional holdings & executives’ shares<\/p>\n
Does Apple pay dividends? A history of rewarding shareholders<\/p>\n
Apple’s stock split history: Everything you need to know<\/p>\n
Where is Apple’s headquarters? A spaceship-like office with thousands of trees
\n#Morgan #Stanley #analyst #offers #Apple #stock #forecast<\/p>\n","protected":false},"excerpt":{"rendered":"
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