Morgan Stanley believes Apple (NASDAQ:AAPL) is well positioned to benefit from a significant iPhone price increase expected this September, estimating that a roughly $200 increase could lift fiscal third-quarter 2026 earnings per share by between 2% and 4%, while adding around 1% to fiscal 2027 EPS forecasts. According to the bank, investors have yet to fully reflect this opportunity in Apple’s valuation.
Higher Prices Could Translate Into Stronger Earnings
“The market is increasingly focused on the impact of price hikes on Apple fundamentals,” Morgan Stanley analysts led by Erik Woodring wrote in a research note maintaining their Overweight rating on the stock. “Our analysis suggests higher prices = higher earnings power.”
The investment bank argues that Apple customers have consistently demonstrated a willingness to absorb price increases, particularly when it comes to flagship hardware products.
“Apple’s core product (i.e. iPhone, Mac, and iPad) demand has been somewhat inelastic, with iPhone being the most inelastic product within Apple’s product ecosystem, followed by Mac and then iPad.”
Morgan Stanley believes this is especially important because the iPhone is both Apple’s highest-value product and the device consumers replace most frequently. As a result, a $200 increase could provide a meaningful boost to margins with only limited impact on demand.
Supply Constraints May Support Apple’s Pricing Power
The bank also pointed to current industry conditions as another reason Apple may be able to implement higher prices without significantly affecting sales.
“Recent price increases are unlikely to materially disrupt demand, especially considering supply challenges at peers.”
Morgan Stanley added that checks across Apple’s supply chain continue to indicate stable production plans.
“IPhone build plans have remained largely unchanged in the last several weeks,” the analysts said, suggesting suppliers and manufacturing partners are not seeing signs of weaker demand ahead of the expected September product launch.
Outside the iPhone business, Morgan Stanley also noted that it has “not observed any meaningful changes in Mac or iPad lead times” following recent price increases, viewing this as evidence that Apple is successfully protecting profitability despite higher component costs.
Several Catalysts Could Support Apple Shares
Morgan Stanley identified three major events that could influence investor sentiment over the coming months.
These include Apple’s June-quarter earnings results and guidance for the September quarter, the expected launch of the iPhone 18 Pro, iPhone 18 Pro Max and Apple’s first foldable iPhone, as well as the public beta release of an upgraded Siri AI platform.
According to the bank, the combination of these developments could prompt investors to reassess Apple’s earnings potential over the near term.
Long-Term Product Cycle Remains Positive
Looking beyond this year’s product launches, Morgan Stanley believes Apple is entering a multi-year upgrade cycle.
The bank expects the introduction of Apple’s first foldable device, the next-generation iPhone Air 2 and the anticipated 20th anniversary iPhone lineup to “should support healthy iPhone demand through FY27 and FY28.”
Morgan Stanley also continues to view artificial intelligence as an important long-term growth driver.
“We continue to see a longer-term path toward an AI-driven replacement cycle as Apple Intelligence and Siri AI functionality steadily improves,” the firm wrote.
With quarterly results and updated guidance due before the September launch, investors are unlikely to wait long before learning whether Apple’s pricing strategy performs as Morgan Stanley expects.
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