Apple ( AAPL ) shares were active in early Friday trading, and withing striking distance of their all-time highs, following a bullish note from a top Wall Street analyst who predicted the stock's impressive second half rally earlier this year.
Apple shares have added around $650 in market value since the group's AI event earlier this summer when the tech giant outlined its ambitions to infuse the new technology into its iPhone 16 and its broader suite of consumer-focused hardware and online services.
The stock has firmly outperformed the Nasdaq and S&P 500 over that time, rising around 26.1% since the June 10 event against gains of 16% and 13.2% for the respective benchmarks. It's also reclaimed the title of world's most-valuable company it lost to AI chipmaker Nvidia NVDA in early November.
Apple is betting that its new AI technologies, dubbed Apple Intelligence, will prompt a big increase in handset upgrades as consumers look to adopt the new features, which will be available only in the new iPhone 16 and last year's iPhone 15 Pro.
The rollout of those features, which include upgrades to its Siri voice assistant, an AI image generator and notification summaries, will take several months, and will be fully available only in certain markets, as Apple deals with language, tech and regulatory challenges.
Here's what Morgan Stanley says about Apple shares now.
Apple analyst updates outlook on iPhone and AI
Morgan Stanley analyst Erik Woodring said he sees Apple stock gains extending into the coming year as well, and he reiterated that Apple remained the investment bank's 'top pick' heading into 2025.
"Over the last month Apple shares have outperformed the S&P 500 by 10 points" and are now trading at all-time highs," said Woodring, who reiterated his $273 price target and 'overweight' rating in a note published Friday.
"While we believe part of Apple's recent string of outperformance is tied to market factors and short covering," he wrote, "we remain bullish on Apple's ability to drive over $8.50 of earnings power in [the 2026 financial year], which we believe is also a factor helping to support near-term outperformance, with investors potentially pricing in the next iPhone cycle further ahead than past cycles."
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Apple launched its iPhone 16 in September, touting a series of new AI-powered features that it said would drive handset sales into the holiday period and beyond.
However, with many of the features unavailable in markets outside the U.S., and several of them rolling out only on a delay basis with new software updates, reports have suggested uneven demand for the iPhone 16 has been uneven since the September unveiling.
"Admittedly, Apple's near-term demand remains mixed, with services growth outperforming our expectations, but iPhone/Product growth relatively muted given Apple Intelligence is not yet widely available to users outside the U.S.," Woodring said.
"However, we believe that [the current financial year] represents a bit of a calm before the storm, as fundamentals should accelerate in [the 2026 financial year]," he added.
The analyst sees iPhone shipments rising 12% in the current financial year to around 258 million units as the Apple Intelligence features, as well as the ChatGPT integration, take hold.
Apple risk from Google search deal limited
Woodring noted a handful of issues that investors have raised heading into year-end, including the risk tied to Apple's search-engine deal with Alphabet ( GOOGL ) .
The pact, which pays Apple around $20 billion a year for ad revenue generated on the Safari browser, is at risk of being undone by an antitrust lawsuit brought against the Google parent by the U.S. Department of Justice.
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Woodring has said that scrapping the deal could clip between 4% and 6% from Apple's bottom line, but he noted Friday that "risks remain limited in the near to medium term."
The analyst also believes that risks tied to China's import tariffs are limited, and he sees the potential for fatter gross margins from iPhone sales.
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For the fiscal fourth quarter ended in September Apple reported earnings of $1.64 as revenue rose 6% from a year earlier to $94.93 billion. Sales of its flagship iPhone sales rose 5.5% to a September-quarter record of $42.2 billion.
Finance chief Luca Maestri said current-quarter sales, a key metric for investors, would likely rise by low- to mid-single digits percent from the year earlier's $119.58 billion. That forecast was largely shy of Wall Street forecasts.
Apple shares were last marked 0.3% lower in early Friday trading and changing hands at $247.24 each, a level that values the world's most-valuable company at $3.73 trillion.
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