No Ordinary iPhone, No Ordinary Cycle: Morgan Stanley Says Consensus Estimate On iPhone 8 Falls Short

Apple Inc. AAPL investors are hoping the 10-year anniversary iPhone 8 will be no ordinary iPhone. According to Morgan Stanley analyst Katy Huberty, the iPhone 8 sales cycle will be no ordinary cycle.

Bring On The Supercycle

After the firm’s recent round of checks, Morgan Stanley has raised its price target from $154 to $161 on expectations of an iPhone 8 “supercycle.”

Morgan Stanley has an Overweight rating on the company, same as the average analyst rating from the Street.

However, the firm believes the consensus estimates from the Street regarding iPhone numbers underestimate the potential the expected "supercycle" could realize.

“Our upgrade analysis, which covers regions that represented 96 percent of iPhone shipments in CY16, points to base case of 260 million (top down) to 264 million (bottom up) demand during the FY18 Supercycle and implies at least 7 percent upside to current forecast of 242 million,” Huberty explained.

Morgan Stanley sees the highest demand growth in China.

Huberty said recent checks indicate that up to 50 percent of iPhone 8 supply could be OLED devices, well above the firm’s previous conservative estimates of 33 percent. Based on the higher OLED mix, Morgan Stanley has upped its average sales price (ASP) estimate for iPhone 8 from $713 to $753, well above consensus Wall Street estimates of $675.

In addition to an acceleration in iPhone demand, Morgan Stanley predicts Apple will once again raise its dividend and share buyback budget this year. The firm is estimating a 10 percent dividend hike and an increase in cumulative buyback authorization from $175 billion to $210 billion.

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