Apple rose for seven consecutive days, Morgan Stanley raised iPhone third-quarter sales forecast

Apple (AAPL.US) stock price has risen for the seventh consecutive trading day, closing up 1.4% at $224.72 on Thursday. The tech giant saw an approximately 6% increase in the previous six trading days. Overall, the stock has risen over 15% year-to-date, compared to a 14% increase in the S&P 500 index.

According to financial news outlet, Wall Street generally holds a bullish view on Apple, with an average analyst rating of "Buy": 32 analysts have given Apple a "Buy" or higher rating. 12 analysts rated the stock as "Hold", while 2 analysts recommended selling. Earlier this month, Apple's quarterly performance and preliminary outlook for the next quarter received positive feedback from Wall Street, with several firms highlighting the potential of the next generation iPhone and the tech giant's artificial intelligence strategy.

For example, analysts led by Erik Woodring from Morgan Stanley pointed out that the sales performance of the iPhone 15 in July exceeded expectations, and this momentum seems to continue with the release of the iPhone 16. Morgan Stanley rates Apple as "Overweight" with a target price of $273.

Analysts at Morgan Stanley stated that based on the latest survey by their Greater China Technology Hardware team, iPhone sales in July were stronger than initially expected, resulting in an upward revision of third-quarter iPhone sales to 54 million units (an 8% year-on-year increase), 200,000 units higher than previous forecasts. They noted that while sales of iPhones in early October remain crucial for the next cycle's growth, the momentum for the release of the iPhone 16 seems to be building.

Analysts mentioned that the upward revision for the third quarter reflects the sustained strong momentum of the iPhone 15 in the later stages of the cycle, as sales of all other iPhone models have remained unchanged. However, it is currently unclear whether this trend reflects expectations for Apple's AI feature Apple Intelligence or other factors driving upgrades.

The analysts added that the 54 million iPhones represent a historical record for the third quarter (400,000 units higher than the previous record), indicating that third-quarter iPhone shipments will reach 55 million units (a 10% year-on-year increase), 5% higher than Morgan Stanley's current third-quarter shipment forecast of 52.5 million units and 10% higher than the consensus of 50 million units.

Woodring and his team mentioned that they have not heard of any increase in production for the iPhone 16 version so far. They stated that the upward revision in third-quarter iPhone production only applies to the iPhone 15 (an additional 1 million units) and the iPhone 15 Pro/Pro Max models (an additional 1 million units), while the estimate for iPhone 16 production in the second half of 2024 remains between 85 million and 90 million units, currently likely around 87 million units.

Analysts anticipate that Apple will not make any adjustments to the production of the fourth quarter of 2024 and/or the iPhone 16 until early to mid-October, when early booking and sales data for the iPhone will be more readily available Woodring and his team stated that Apple provided forecasts for the third quarter at the end of July, indicating that they may have known that the performance of the iPhone 15 in July exceeded expectations. However, given that Apple has never fallen below market expectations since 2016, the company likely provided itself with some upward revenue cushion in the guidance. Therefore, analysts believe that the uptrend of iPhones in July increased the likelihood of the third-quarter performance exceeding expectations. Analysts pointed out that their revenue forecasts for the third quarter remain unchanged