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Morgan Stanley is getting more optimistic on Apple stock. “We think the Apple story could be turning the corner,” analyst Erik Woodring wrote in a Thursday note. To back this up, Woodring pointed to potentially stronger-than-expected iPhone builds in China and the possibility for estimates to be revised higher, which will allow the stock’s multiple to expand and drive shares up. Morgan Stanley’s China team recently raised its iPhone builds estimate for September by 8%, saying iPhone sales were stronger than expected in the June quarter, which means supply will need to be replenished. “These positive revisions are a result of better than expected iPhone sell-through in the June quarter, which reduced iPhone channel inventory below normalized levels, and thus created a larger channel fill opportunity in the September quarter, as the positive build revision is entirely iPhone 16 (2M units) and Pro Max (2M units) models,” he said. Woodring said this more upbeat forecast is baked into its estimates already, but it could imply more upside ahead in the December quarter, which is typically more volatile than the September period. “Relative to our current 78M December quarter iPhone shipment forecast, this could imply modest iPhone shipment upside, though we’ll be able to narrow this range next month when the iPhone 17 is officially launched,” he said. Apple has yet to fully roll out Apple Intelligence, its full suite of artificial intelligence integration. Functions like an updated Siri with AI integration has been delayed several times since it was first announced last year. Apple is expected to announce the details of its new iPhone next month. “We are turning more bullish – forward iPhone unit/revenue growth expectations are still relatively muted, many of the same factors that got us bullish last July remain (elongated replacement cycles/pent up iPhone demand, new form factors in the pipeline, structural gross margin tailwinds, etc.), we’re past peak tariff risk (Section 232 is a non-event), regulation is not as significant of a near-term headwind as feared (though remains a long-term risk), pricing is an underappreciated lever that Apple can pull for both Product and Services (Apple hasn’t raise Services prices in 2 years), and relative to the S & P, Apple is trading in-line with the trailing 5 year average,” the analyst said. Apple shares have pulled back more than 7% in 2025. The analyst said most institutions are actually underweight Apple compared with its peer megacap technology stocks. “In our view, Apple is one potential AI partnership away from breaking out,” the analyst said.
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