Morgan Stanley Touts Apple as 2025's Top Pick with Bold iPhone Cycle Predictions
1min read Morgan Stanley has reiterated Apple as its top stock pick for 2025, maintaining an overweight rating and a price target of $273. Analyst Erik W. Woodring emphasizes the potential of Apple Intelligence in accelerating the iPhone replacement cycle starting fiscal 2026. This is anticipated to drive not only record cycles in the coming fiscal years but also to enhance user acquisition.
The analysts state that Apple's service business is projected to sustain double-digit growth, further bolstered by expanding profit margins. This robust outlook could lead to an estimated earnings per share of $8.52 in 2026, outperforming market expectations by approximately 4%. Despite Apple's strong performance, attributed partially to market factors and short-covering, analysts suggest that investors may be pricing in the forthcoming iPhone cycle sooner than in previous cycles.
While current demand and growth in Apple's service business have exceeded expectations, uncertainty remains because Apple Intelligence has not yet been widely deployed outside the U.S. Consequently, iPhone and related product growth appear comparatively weak. Analysts foresee 2025 as a calm before a surge in 2026, driven by iPhone replacement dynamics.
Woodring and his team have identified five key themes in discussions with investors: rapid acceleration of the iPhone replacement cycle due to Apple Intelligence by 2026, limited risks from Chinese import tariffs, sustained service sector growth, and potential increases in iPhone gross margins. Moreover, they have raised questions about the impact of the U.S. Department of Justice's litigation against Alphabet on Apple, focusing on its timing and ramifications.
