Apple Intelligence Will Play 'Starring Role' In iPhone 16 Launch, Says Analyst: No Price Hike Expected, But Accelerating Replacement Cycle 'Key Factor' For The Stock

Apple Inc.’s AAPL all-important hardware launch event for the year, dubbed Glowtime, has been scheduled for Monday, Sept. 9, and will be held at the Steve Jobs Theater in Cupertino. An analyst at Morgan Stanley on Thursday offered his take on what to expect from the event.

Stock Implications: Apple shares will likely perform In line with the typicality of the iPhone launch event, when they underperform the market (by about 60 basis points) on launch day and then merely modestly outperform the market (by 3 basis points on the average) in the three months following the event, said analyst Erik Woodring in a note.

That said, the analyst did not rule out of the possibility the stock performing better than historical seasonality, given his expectations that the iPhone 16 and Apple Intelligence will likely unlock pent-up demand. He estimates that the iPhone’s upgradable base is currently 40% larger than ahead of the 5G cycle. The iPhone replacement cycle, which currently has a peak value of 4.8 years, will likely accelerate, he said, saying it is the “key factor” for the Apple stock being a top pick.

Typically, Apple shares underperform when replacement cycles contract and underperform when replacement cycles are elongated, Woodring said. This, the analyst, said creates a positive setup as he sees a contraction in iPhone replacement cycles through 2026 ahead.

See Also: How To Buy Apple (AAPL) Stock

What’s In Store: Woodring expects Apple to launch the iPhone 16 family, new Apple Watch models, Series X and Ultra 3, and potentially new AirPods. For the flagship iPhones, the analyst looks forward to:

• Catch-up upgrades for the iPhone 16 and iPhone 16 Plus, and the addition of an Action button
• More pronounced component upgrades for iPhone 16 Pro and Pro Max such as
  • Thinner bezels.
  • Larger display and slightly larger form factor.
  • A periscope lens for iPhone 16 Pro.
  • New, faster A18 Pro chipset, potentially having more neural engine cores for enhanced AI capabilities.
  • Improved battery capacity, and a metal casing to improve heat dissipation.

The upcoming iPhone 16 will likely add the Capture button across the lineup, which would act like a shutter button on a digital camera, Woodring said.

The analyst expects preorders to start Friday, Sept. 13, with in-store availability/shipments, beginning on Friday, Sept. 20.

3 Focus Areas: Woodring said he would focus on three aspects, namely the iPhone pricing, iPhone battery life, and any new Apple Intelligence features.

Apple will likely price all iPhone 16 models the same as their like-for-like iPhone 15 counterparts, Woodring said. The analyst, however, expects Apple to eliminate the 128GB iPhone Pro SKU, priced at $999. This will render the starting price of the iPhone 16 Pro at $1,099.

The analyst expects the iPhone 16 to make up 68% of Apple’s fiscal year 2025 iPhone shipments, up from the 66% that the iPhone 15 accounted for in the previous year. He estimates the iPhone’s average selling price to rise 5% year-over-year in 2025. Citing Morgan Stanley’s sensitivity analysis using different pricing/mix factors, every 1% increase in the iPhone ASP will translate to 3 cents per share earnings per share upside in 2025.

Citing reports, Woodring said Apple will likely bring a new and about 10% larger capacity battery to the iPhone 16 Pro/Pro Max. This is important considering the amount of computing power Apple’s on-device LLMs will likely use, he said. “We believe a strong battery upgrade can help to drive old device refreshes, given battery life is one of the key reasons users historically upgrade,” he said, adding that every 1% increase in iPhone shipments will equate to about 50-basis-point earnings per share upside in 2025.

Apple Intelligence will likely play a “starring role in the iPhone 16 launch event, with ‘Glowtime’ almost certainly a reference to the new Siri user interface in iOS18,” said Woodring. That said, he expects Apple Intelligence feature introductions
to be staggered through this Fall. “The more that Apple teases the performance of Apple Intelligence on the new iPhone 16 models with 8GB of DRAM and a more powerful processor, the greater the odds of consumers associating Apple Intelligence with needing a new iPhone,” he said.

Potential Wildcards: Although Morgan Stanley currently factors in status quo prices, Apple could spring a surprise by raising the new iPhone prices, said Woodring. The year-over-year price increases could prove to be a net negative for Apple, as it would lead some upgraders to extend the useful life of their iPhone for another year, he said.

The new Apple Intelligence features, or new language support, are also key wildcards to watch for, the analyst said.

He is skeptical about the AirPods Pro 3 launch at the event, given the company’s Wearables, Home and
Accessories segment has underperformed the rest

Woodring also mentioned the aggressiveness of wireless carriers for the new iPhone launch and year-over-year changes in trade-in values, given the limited backward compatibility of Apple Intelligence, as wildcards.

Morgan Stanley has an Overweight rating and a $273 price target for the stock.

Price Action: Apple ended Thursday’s session up 1.46% at $229.79, according to Benzinga Pro data.

Check out more of Benzinga’s Consumer Tech coverage by following this link.

Read Next:

• Apple Will Pursue ‘Aggressive And No Holds Barred Strategy Around AI,’ Says Bullish Analyst: ‘Worst Is In Rearview Mirror’

Photo courtesy: Apple