Apple (NASDAQ:AAPL) shares rose nearly 2% in pre-market trading today after Morgan Stanley analysts upgraded the stock to a Top Pick and increased the price target from $216 to $273.
The upgrade stems from strong confidence that the introduction of Apple Intelligence and its limited backward compatibility will spark a multi-year refresh cycle for Apple devices. Analysts pointed out that the market has yet to fully appreciate the substantial impact of the upcoming upgrade cycle. Their analysis suggests that Apple is poised to ship nearly 500 million iPhones over the next two years—235 million in fiscal 2025 and 262 million in 2026. This represents a 6% increase compared to the record 2021-2022 cycle. With a 5% annual growth in the iPhone’s average selling price (ASP), this is projected to generate nearly $485 billion in total revenue and $8.70 in earnings by fiscal 2026, compared to previous estimates of $459 billion and $8.20, which is 7-9% above market expectations.
Additionally, three key near-term catalysts are anticipated to maintain Apple's recent stock outperformance: the Q3 earnings report, the mid-September iPhone launch, and potential positive iPhone build revisions in mid-October. Historical trends indicate that accelerating unit growth typically drives Apple stock to outperform, according to Morgan Stanley analysts.