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AAPL Stock May Be Approaching a Major Inflection Point - Here's Why Morgan Stanley Is Bullish

Roughly 1.3 billion iPhones still lack the hardware for full AI features.

By Damilola Esebame, CFEI® , Edited by Laura Hohenstein

Updated Sept. 16, 2026

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Apple (NASDAQ:AAPL) closed at $332.27 on September 11 after Morgan Stanley analyst Erik Woodring reiterated his Overweight rating and $360 price target, calling the September 9 product event "more exciting" than recent cycles.

The bull case centers on roughly 1.3 billion active iPhones that lack the hardware for full artificial intelligence capabilities, a gap that could push growth above trend into fiscal 2027. Knowing whether you are doing better financially than you realize may shape how much of that upside you are positioned to capture.

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Morgan Stanley reiterated its Overweight rating and $360 price target

Woodring maintained his $360 target and Overweight rating following the September 9 event, calling it the most innovative Apple showcase in recent years, Barchart reported via Yahoo Finance. The target was initially raised from $330 to $364 after the June 2026 WWDC event, then trimmed to $360 in July after Services growth disappointed, AppleInsider noted.

Under Morgan Stanley's optimistic AI adoption scenario, the firm projects mid-teens growth for hardware and over 10% growth for Services in fiscal 2027, flowing through to estimated earnings per share of approximately $10, CryptoBriefing reported. Applied to a roughly 35-times earnings multiple, those projections support the $360 target.

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The September 9 event unveiled Apple's first foldable iPhone and overhauled Siri

The September 9 product showcase, led by CEO John Ternus, introduced several new offerings that Woodring described as a meaningful shift from routine annual upgrades, TheStreet reported.

Key announcements included the following:

iPhone Duo, Apple's first foldable device, starting at $1,999 with pre-orders on October 16.
A20 chips built on a 2-nanometer process, the first of their kind in a consumer smartphone.
An overhauled Siri with on-device context, visual intelligence, and conversational ability.
iPhone 18 Pro and Pro Max with $100 price increases to $1,199 and $1,299.

Morgan Stanley estimates the iPhone Duo alone could contribute roughly $14 billion in revenue during the December 2026 quarter, CryptoBriefing noted. Pre-orders open October 16, with general availability on October 23.

Roughly 1.3 billion iPhones lack the hardware for full Apple Intelligence

Morgan Stanley estimated that approximately 1.3 billion iPhones in circulation lack sufficient hardware to run the full Apple Intelligence suite, with about 850 million entirely incompatible, CryptoBriefing reported. The main constraint is memory, as the updated Siri requires at least 12 gigabytes of unified memory to support advanced queries.

Woodring described the upgrade opportunity as "underappreciated" and projected that Apple Intelligence could prompt nearly 500 million iPhone shipments over a two-year span. The hardware gap gives consumers a technical reason to upgrade rather than a cosmetic one, which is the foundation of the bull case for your position.

Q3 fiscal 2026 delivered $109.4 billion in revenue and record iPhone sales

Apple reported fiscal third-quarter revenue of $109.4 billion on July 30, up 16.4% year over year, while earnings per share climbed 29% to $2.02, Barchart reported. iPhone revenue surged 21.7% to a June-quarter record of $54.3 billion, and Mac revenue jumped 28.7% to $10.4 billion, driven by strong demand for the MacBook Neo and MacBook Pro.

Gross margin expanded to 50.1%, benefiting partly from U.S. tariff refunds. Apple returned $33 billion to shareholders through buybacks and dividends during the quarter, a pace that compounds in your favor regardless of near-term price action.

Services growth slowed to 12% and missed estimates, pressuring the outlook

Apple's Services business grew 12.1% to $30.7 billion in fiscal Q3, falling short of the $31.18 billion estimate from Barclays and marking a slower pace than recent quarters, AppleInsider reported. Morgan Stanley attributed the miss to weaker mobile gaming spending, regulatory changes allowing alternative app stores in Europe, and the U.S. court ruling in the Epic Games case.

Morgan Stanley now expects Services growth to slow to roughly 9.5% in the September quarter, the report concluded. The firm cut its fiscal 2027 earnings estimate from $10.39 to $10 per share, a reduction that explains the price target trim from $364 to $360 despite strong iPhone demand.

September-quarter guidance of 9% to 11% growth fell below Wall Street forecasts

Apple guided September-quarter revenue growth of 9% to 11%, implying a midpoint of roughly $113 billion, compared with the $114.9 billion analysts had expected, Barchart reported. Management projected mid-teens iPhone revenue growth for the quarter, also below the 17.6% consensus.

Apple attributed the softer outlook to persistent shortages of chipmaking capacity and memory components rather than weakening demand, the report noted. Morgan Stanley's supply-chain checks indicate Apple has not cut production plans for the second half of calendar 2026, suggesting strong upgrade activity is still expected once the new devices reach customers.

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Apple trades at 36 times forward earnings, above its sector median

Apple stock trades at a forward price-to-earnings ratio of 36.06, a premium over both the technology sector median and Apple's own historical average, Barchart reported. The stock is up 22.2% year to date and sits just 3.6% below its 52-week high of $344.57.

Among 41 analysts covering Apple, 21 rate it a Strong Buy and 13 a Hold, with the average price target at $329.81 and the street-high at $400, the report noted. UBS offered a Neutral rating and a $296 target, reflecting how divided opinion remains on whether the current multiple already prices in the upgrade cycle.

Bottom line

Morgan Stanley's $360 target rests on a measurable hardware gap. 1.3 billion iPhones that lack the memory to run Apple Intelligence, a constraint that could drive nearly 500 million shipments over two years. The September 9 event added the iPhone Duo, A20 chips, and an overhauled Siri, prompting Woodring to call the lineup more innovative than anything Apple has shown recently.

Exploring must-have investing apps to track Apple's quarterly Services trajectory and iPhone mix could help you weigh the 1.3 billion-device upgrade opportunity against a 36-times forward multiple that may already price in some of that upside. The Services' slowdown and supply constraints add near-term friction, but the long-term thesis depends on how many of those 850 million incompatible iPhones actually get replaced.

This article is for informational purposes only and should not be considered investment advice.

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