Morgan Stanley Revises Forecast: Apple Expected to Rise by 13%
Analysts maintain optimism for Apple, acknowledging they underestimated the effects of negative supplier guidance in June and misjudged average selling prices.
Apple Inc. (AAPL) shares surged this week following the release of its fiscal second-quarter results, which surpassed market expectations. Despite prior concerns about slowing iPhone demand and cautionary signals from several Apple suppliers, the tech giant successfully restored investor confidence. (See also: Is Apple’s Stock Facing a Bear Market?)
The company’s strong Q2 performance, with revenue and earnings exceeding forecasts even though iPhone sales slightly missed consensus, prompted many analysts who had recently turned bearish on this FAANG stock to reassess their projections. In a client note on Wednesday, Morgan Stanley analysts acknowledged repeated errors in their forecasts, having overestimated the negative impact of weaker June quarter outlooks from suppliers like Taiwan Semiconductor (TSM) and AMD.
“Supplier results suggested a significant downside for the June quarter that ultimately did not materialize,” stated Morgan Stanley analyst Katy Huberty.
Market Overreacted to Supplier Guidance for June Quarter
Apple projected iPhone shipments of 39 million units for the quarter ending in June, below Morgan Stanley's prior estimate of 42 million but well above their revised forecast of 34 million. Huberty maintains an overweight rating on AAPL, anticipating shares to climb over 13% within the next year to reach $200. She noted, “Even with lengthening smartphone replacement cycles, we expect Apple to achieve 4% revenue growth and 16% EPS growth over the next three years, driven primarily by its services segment.”
Similarly, Bank of America highlighted a divergence between iPhone unit guidance and supply chain data, attributing it to consumers purchasing more affordable iPhone models than initially expected. This shift led to reduced demand for the iPhone X and increased sales of iPhone 8 and 7 models, resulting in a lower adjusted average selling price (ASP). Analyst Wamsi Mohan pointed out Apple’s March quarter ASP was $728 versus the consensus of $742. Maintaining a buy rating, Mohan raised his price target to $225, suggesting over 27% upside from Wednesday’s close.
Apple’s stock closed up 4.4% at $176.57 on Wednesday, marking a 4.3% gain year-to-date and a 19.1% return over the past 12 months. This performance outpaces the S&P 500’s 1.4% loss YTD and 10.2% gain over the same period. (See also: Apple vs. Facebook: Which Stock Will Prevail?)
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