Apple's Long-Term Growth Potential Post-Price Hike: Morgan Stanley's Optimistic Rationale and Market Implications

Apple's stock has long been a barometer for global consumer demand and technological innovation. In 2025, the company finds itself at a pivotal juncture, balancing the pressures of rising tariffs, supply chain disruptions, and shifting consumer expectations. Yet, despite these headwinds, Morgan Stanley has issued a bullish assessment of Apple's long-term trajectory, raising its price target to $298 from $240, according to a Yahoo Finance report. This move reflects a nuanced interplay of near-term pricing strategies and long-term product cycles, suggesting that Apple's growth story remains intact-even as it navigates a complex macroeconomic landscape.

The Catalyst: iPhone Demand and Production Upside

Morgan Stanley's optimism hinges on two key pillars: the iPhone 17's strong performance and the anticipation of the iPhone 18 cycle. According to that Yahoo Finance report, the firm has increased its production forecast for the iPhone 17 to over 90 million units by year-end 2025. This surge is driven by an aging installed base of iPhones, which is expected to fuel a robust upgrade cycle in 2026, according to a WCCFTech analysis. The bank also highlights the potential of the first-ever foldable iPhone, which could catalyze demand in a bull case scenario where Apple sells 270 million units in 2026, as noted in a WebProNews article.

These projections are not mere speculation. Apple's Q3 2025 revenue of $95.4 billion, driven by pre-holiday purchases ahead of anticipated price hikes, underscores the market's appetite for its products, as detailed in an Apple Magazine piece. Even as tariffs and production costs rise, the company's ability to absorb some of these expenses while passing others to consumers-such as a $50 increase for the iPhone 17 Pro models-demonstrates pricing power, according to a Techi report. This strategy, while risky in the short term, positions Apple to maintain margins as it transitions to higher-cost manufacturing hubs like India and Vietnam, a point explored in an Impact Wealth analysis.

Pricing Strategies and Revenue Resilience

Apple's pricing decisions in 2025 have been shaped by a dual challenge: mitigating the impact of tariffs and preserving brand equity. As stated by CEO Tim Cook, the company faced $800 million in tariff-related costs in Q3 2025, with projections of $1.1 billion in Q4 if current policies persist. To offset these costs, Apple has strategically raised prices on premium models, a move that aligns with Morgan Stanley's revised EPS estimates for fiscal 2026 and 2027.

The financial impact of these strategies is already evident. Apple's Services segment, which includes the App Store, Apple TV+, and iCloud, generated a record $27.42 billion in Q3 2025, up 12% year-over-year. This diversification of revenue streams-beyond hardware-provides a buffer against potential headwinds in the iPhone business. Moreover, the company's ability to innovate in services (e.g., Apple Intelligence) could further decouple its growth from hardware cycles.

Risks and Realities

Morgan Stanley's bullish stance is not without caveats. Analysts warn that prolonged trade tensions could erode demand for premium devices like the iPhone 17 Pro, particularly if price hikes outpace consumer willingness to pay. Additionally, Apple's delayed AI rollout and rising competition from Huawei and Xiaomi in international markets add complexity to its growth narrative.

However, the firm's revised production forecasts and EPS estimates suggest that Apple's ecosystem advantages-brand loyalty, a sticky services platform, and a pipeline of hardware innovations-remain intact. The potential for AI-driven features in future iPhones, coupled with the foldable device's market potential, could reignite consumer enthusiasm and justify the elevated price target.

Conclusion: A Stock at a Crossroads

Apple's long-term growth potential post-price hike is a story of resilience and recalibration. While tariffs and supply chain challenges have forced the company to adopt a more aggressive pricing strategy, these moves are underpinned by a strong product roadmap and a diversified revenue model. Morgan Stanley's $298 target reflects confidence in Apple's ability to navigate these challenges while capitalizing on its ecosystem's enduring appeal.

For investors, the key question is whether Apple can sustain this momentum as global trade dynamics evolve. The answer may lie in the company's ability to balance premium pricing with affordability-a tightrope walk that will define its next chapter.