Apple (AAPL) has received its fair share of criticism in the past when it comes to the iPhone. From slow development cycles to reduced demand, the market has punished the stock without hesitation. Yet every time the iPhone maker looks to have plateaued, it strikes back. The recent note from Morgan Stanley analyst Erik Woodring shows how bullish the firm is on AAPL stock. And it has the numbers to back its bullish thesis.
The investment firm’s late 2025 AlphaWise Smartphone Survey shows upgrade rates in China going up by nine points YoY. Global blended iPhone upgrades have never been as high as they are now, while the switching rate to Apple has also reached a five-year high. On top of all this, 27% of the survey participants have shown an interest in the foldable iPhone. Bank of America Securities has already predicted 20 million sales of the foldable iPhone, with the launch just around the corner. Morgan Stanley now forecasts 6% iPhone revenue growth in FY26, compared to the Wall Street consensus of 3%.
Apple designs and manufactures devices and accessories such as the iPhone, iPad, Mac personal computers, tablets, home devices, and wearables. It also provides various services like AppleCare and the App Store. The company is headquartered in Cupertino, California.
AAPL stock has roughly mirrored the broader market’s performance over the last 12 months. During this period, it has given returns of 13.35% compared to the S&P 500 Index’s ($SPX) 16% returns. If analyst sentiment is anything to go by, the stock could significantly outperform the market over the next 12 months.
Apple is trading at a forward P/E of 29.12x, pretty close to its five-year average of 28.7x. When one considers this valuation in the context of Morgan Stanley’s report, it appears the market is yet to price that iPhone growth in. Morgan Stanley believes the foldable iPhone will be a hit and boost FY27 iPhone revenues. Its estimates are 4% above consensus, which is an extremely bullish position and deserves a valuation premium.
The above estimates are not baked into the relatively disappointing 9.5% consensus earnings growth in FY27. Once analysts start including improved iPhone growth numbers, this earnings growth number can significantly improve. Wall Street expects the firm to grow its earnings by 11.21% in 2028 and 20.09% in 2029. The earnings landscape could significantly change if the foldable iPhone is a hit.
