Morgan Stanley Positively Surprised By iPhone Demand; Raises Target On Apple To $162

• Apple Inc. AAPL shares have declined 11.79 percent over the last six months, hitting a low of $103.12 on August 24.
• Morgan Stanley’s Katy L. Huberty has maintained an Overweight rating, while raising the price target from $155 to $162.
• Morgan Stanley’s surveys indicate solid market growth, along with record market share gains for Apple. Huberty also highlighted the “surprisingly” robust smartphone market demand, despite macro volatility.

According to the Morgan Stanley report, “More people expect to purchase a smartphone in the US over the next 12 months than a year ago, despite market maturity.”

Related Link: Munster: iPhone 6s Tracking Better Than iPhone 6 In Stores

Analyst Katy Huberty believes that the demand is being driven by the shrinking replacement cycles, where the average lifecycle of a smartphone in the US has shortened by more than five months, while replacement cycles in China are also becoming shorter even as China grows as a percentage of the market.

“Further supporting revenue growth, ASPs should rise, particularly in China, where the majority of consumers plan to spend more on their next device. Overall smartphone demand that is up in both the US and China supports our view of 10 percent year on year unit growth in CY16,” Huberty stated.

The better-than-expected iPhone growth has been attributed not only to the robust upgrade cycle, but also Apple’s record share gains in both the US and China, “as consumers increasingly focus on brand/software over price.”

The FY16 iPhone unit growth estimate has been raised from 3 percent to 7 perfect, “to better reflect more upgrades and expected share gains at the high end of the market.”