On April 28, 2025, Morgan Stanley raised its price target for Apple to $235 from $220, maintaining an Overweight rating, signaling strong confidence in the tech giant’s long-term growth potential. This adjustment reflects optimism about Apple’s robust financial health, particularly its strong free cash flow and undervalued Services segment, despite near-term uncertainties surrounding tariffs, AI advancements, and iPhone sales.
Morgan Stanley:
Apple’s March quarter earnings setup might be the only “known” amidst a sea of broader unknowns. Many key aspects of Apple’s March quarter report and June quarter guide (yes, we expect AAPL to guide) are relatively “known” at this point – (1) strong iPhone sell-in pull-forward and a weaker USD should help to drive moderate upside to March quarter results and a June quarter revenue guide in line with consensus/MSe, in line with buyside expectations; (2) there is likely (100bps+) downside risk to June quarter consensus gross margins given some degree of tariff costs; (3) China revenue will continue to decline Y/Y in March; and (4) Apple’s capital return update will feature a LSD/MSD Y/Y dividend increase and a $110B addition to buyback authorization, similar to last year.
[H]ow Apple responds to “everything else” [is what] will set the tone for post-earnings sentiment:
(1) how is Apple mitigating supply chain tariff risks short and long term, and what’s the impact on costs/margins;
(2) is demand accelerating alongside sell-in, or is Apple pulling forward demand;
(3) when can we expect an updated Siri, and has Apple’s approach to AI shifted with personnel changes;
(4) what’s the status of Apple Intelligence approval in China and is nationalistic behavior threatening Apple’s standing in its second-largest market;
(5) will Apple be forced to raise prices in the near future to offset tariff pressures; and
(6) how is Apple’s current standing with President Trump and President Xi in China?
We believe it’s unlikely many of these key debates are addressed at earnings, and therefore don’t see the print as a key catalyst for the stock, with shares likely to remain range-bound near term – $170 remains the floor on the stock, while our new $235 price target is the ceiling. However, we expect some clarity to emerge on tariffs, China, AI, iPhone growth, and/or regulatory in the coming 12 months, and given Apple remains the most-underowned megacap in the world, we still see a path to our $235 price target and $284 bull case valuation, which we’d expect to be driven by both positive estimate revisions and multiple expansion, as strong FCF conversion and Services growth remain underappreciated valuation tailwinds vs. other megacaps.
MacDailyNews Take: Bullish.
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