According to Morgan Stanley, Apple is Becoming More Bullish. Here’s Why

Morgan Stanley is becoming increasingly optimistic about Apple’s stock, signaling that the tech giant could be entering a new growth phase.

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“We think the Apple story may be turning the corner,” wrote analyst Erik Woodring in a note published Thursday.

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Woodring highlighted signs of stronger-than-expected iPhone production in China, along with the potential for upward revisions to earnings estimates—factors that could help Apple’s valuation expand and drive share prices higher.

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The firm’s China team recently lifted its forecast for iPhone production in September by 8%, citing robust sales during the June quarter. This surge in demand left inventory levels lower than normal, creating an opportunity for significant channel restocking.

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“These positive revisions stem from better-than-expected iPhone sell-through in the June quarter, which pushed channel inventory below normalized levels. That created a larger channel fill opportunity for the September quarter. The entire positive build revision comes from iPhone 16 (2 million units) and Pro Max (2 million units) models,” Woodring explained.

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Although this brighter outlook is already factored into Morgan Stanley’s estimates, Woodring believes there could still be upside ahead in the December quarter—a period historically more volatile than September.

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“Based on our current forecast of 78 million iPhone shipments for December, this could point to a modest upside. We’ll refine this estimate next month when the iPhone 17 officially launches,” he added.

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Apple has yet to fully implement its Apple Intelligence suite, which includes advanced AI features. Updates like an enhanced Siri with AI capabilities have faced multiple delays since the initial announcement last year. The company is expected to unveil details about its latest iPhone model next month.

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“We’re becoming more bullish. Forward expectations for iPhone unit and revenue growth remain relatively muted, but many of the drivers that made us optimistic last July are still in place—elongated replacement cycles, pent-up demand, new form factors in the pipeline, and structural tailwinds for gross margins.

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We’re also past peak tariff risk (Section 232 is largely a non-event), regulatory headwinds aren’t as severe in the near term as feared, and Apple has an underappreciated pricing lever it can pull on both Products and Services (Services pricing hasn’t increased in two years). Relative to the S&P 500, Apple is trading in line with its five-year average,” Woodring wrote.

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Apple shares are down more than 7% so far in 2025. According to Morgan Stanley, many institutional investors are underweight Apple compared to other mega-cap tech peers.

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“In our view, Apple is just one major AI partnership away from a breakout,” Woodring concluded.

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