Morgan Stanley resets Apple stock forecast ahead of earnings - thestreet.com

Consensus estimates Apple to post about $138.4 billion in revenue and both GAAP and non-GAAP earnings per share (EPS) of around $2.67 for the December quarter. The numbers highlight at least an 11% year-over-year growth in EPS and revenue, but analysts are now tightening their margin forecasts despite favourable iPhone sales and AI roadmap.

In a note, Morgan Stanley analyst Erik Woodring reiterated an Overweight rating and an unchanged price target of $315, but cautioned investors that Apple stock could “trade sideways to modestly lower after earnings.”

The firm expects Apple to beat expectations, driven by stronger, more persistent iPhone demand. Woodring expects December-quarter revenue of about $80 billion, around 4% above consensus, and March-quarter revenue of $55.4 billion, about 8% above consensus, citing supply-chain checks and shipment data.

He said iPhone 17’s “strength remains underappreciated by the Street.”

Morgan Stanley sees cost assumptions as overly optimistic. The firm forecasts March-quarter operating expenses about 7% above consensus and a gross margin forecast 30 basis points below consensus, driven by rising memory costs.

As a result, Woodring sees limited scope for positive EPS revisions for Apple, even with a revenue beat.

Morgan Stanley also flagged potential downside risk to June quarter earnings, estimating EPS of $1.62 versus the consensus of $1.71, citing intensifying memory-related cost pressures. The firm also notes that Apple has historically underperformed the S&P 500 more in Q1 than in any other period.

Looking ahead to 2026

All things considered, Morgan Stanley believes Apple is positioned to outperform in 2026 as a wave of new products and AI-driven catalysts is set to shape the company’s growth trajectory. The firm particularly highlighted the relaunch of Siri in February and Apple Intelligence in June at Apple’s Worldwide Developers’ Conference (WWDC).
Some notable introductions expected include its most “innovative iPhone in 10+ years (Foldable)“, plus the first smartphone powered by 2-nanometer chips, part of the iPhone 18 family.

The firm sees greater benefits from share gains and higher average selling prices, with Morgan Stanley underscoring an EPS of $9.77 for FY2027, roughly 7% above Wall Street consensus.

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Our Take

Earnings will be above consensus. All eyes will be on how margin guidance due to pressure from memory pricing. Every year it's another thing that is cause for drama. It never matters.