To The Moon

Apple iPhone cycle begins on positive side of forecasts, Morgan Stanley says

Apple $Apple(AAPL)$is among the strongest big-tech gainers Wednesday, after Morgan Stanley suggested the iPhone 14 cycle is starting off stronger than expected, with an eye toward relative lead times and early data from China.

The big debate headed into Apple's iPhone reveal event last week, analyst Erik Woodring says, was how resilient demand would be for the new phone against 2022's twin consumer-electronics market headwinds: persistent inflation and growing macroeconomic uncertainty.

But the firm's own tracker shows iPhone 14 Pro Max lead times are the longest (at this point in the cycle) of any iPhone model from the past six years, he said. Lead times on the iPhone 14 Pro are the third-longest in that span, in line with the iPhone 13 Pro/Pro Max last year.

Early adoption is a "bit stronger than we expected," and "early pre-order commentary from markets such as China and India is similarly robust."

The strategy of high-end model differentiation could mean an incremental tailwind to average selling prices during the fiscal year - already 5% ahead of consensus, at $900.

"Collectively, these early cycle data points are helping to dispel fears of material iPhone weakness, aligning with our view that the iPhone is a more 'staples-like; product more resilient to macro shocks (although we caution that it's still very early in the cycle)," Woodring said.

He's modeling 51M iPhone shipments in the September quarter and 84.5M for the December quarter, assuming builds of 49M and 82M respectively. But if builds exceed those expectations in either quarter, there would be upside to the shipment forecast.