Apple Analyst Shrugs Off Lukewarm Early iPhone 16 Demand Trends: Here's Why Soft Preorder Data Hasn't Dented Morgan Stanley's Bullish Thesis

Apple, Inc. AAPL shares came under pressure following commentary about demand immediately after pre-orders began but a bullish analyst explained on Wednesday why the early trends should not be a cause for worry.

The Apple Analyst: Morgan Stanley analyst Erik Woodring has an Overweight rating and a $273 price target for Apple.

The Apple Thesis: iPhone 16 lead times have doubled from last Friday and have been longer internationally than in the U.S., but it is still tracking lower year-over-year, said Woodring in a note. As of Sept. 17, four days after preorders started:

• The U.S. lead time is 14.4 days, up 100% from last Friday;
• But lower than the 21.6-day average for all iPhone 15 models during the same period last year;
• And 18-day average for all iPhone 14 models four days after preorders started in 2022.

Morgan Stanley’s tracking model going back to 2017 showed there is a directional, positive relationship between average lead times in the first two weeks after preorders began and the strength of iPhone shipments over the 12 months, Woodring said. “The longer the average lead time in the first two weeks after pre-orders begin, generally, the stronger the next 12-month shipments are for that specific iPhone model,” he said.

That said, no strong correlation exists when comparing new iPhone model lead times in the first two weeks until the December quarter and total shipments over the next 12 months, the analyst said. “This is because lead times are influenced by both supply and demand, making iPhone lead times as a proxy this early in the cycle not yet truly informative,” he said.

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According to the analyst, the shorter lead times this time around could be due to:

• Apple directing the supply chain to build 5% more iPhone 16s in the second half of the calendar year 2024 than iPhone 15s during the comparable period in 2023;
• The key reason for upgrading to the iPhone 16, Apple Intelligence features, may not be available in the U.S. until October. In the U.K. it would be available only later this year, and the Chinese and Japanese customers get those only next year. This could be delaying upgrades, Woodring said.

The Apple Stock: Looking at stock implications, Woodring said at $216, Apple traded at a relatively full 29 times Morgan Stanley’s 2025 earnings per share estimate of $7.50. Any near-term outperformance from here would have to come from a growth acceleration/positive earnings revisions, he said.

That said, the analyst noted that the December quarter iPhone builds have been revised lower by 3-6 million units over the last decade. Every one million iPhone build reduction equates to 4-cent earnings per downside, with Apple’s price/earnings multiple contracting by 1.5 times, on average, in the three months after an iPhone launch, he said.

The analyst sees downside support for the stock around $197, which translates to $7.30 per share in earnings per share and 27 times multiple.

But most bulls see the fiscal year 2026 and the iPhone 17 as the bigger cycle and any estimate cuts or near-term stock underperformance will likely get bought, leading to just a short window of underperformance before investors turn their attention to the iPhone 17 and FY26 earnings power, he said.

In premarket trading, Apple shares climbed 1.62% at $224.27, according to Benzinga Pro data.

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