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Apple's stock reached an all-time high on Monday, surging 2.5% to $236.30 and pushing the company's market value to an astounding $3.62 trillion. This remarkable achievement comes on the heels of Morgan Stanley's decision to designate Apple as a "top pick" and raise its price target from $216 to $273, citing the tech giant's artificial intelligence efforts as a key driver for future device sales.
The catalyst for this optimistic outlook is Apple's recent unveiling of Apple Intelligence, a move widely interpreted as the company's response to AI advancements from competitors like Google and OpenAI. This new technology is expected to entice customers to upgrade their devices, potentially triggering a substantial multi-year refresh cycle.
Morgan Stanley analysts have revised their projections, now anticipating that Apple could sell nearly 500 million iPhones over the next two years. This represents a significant increase from their previous estimate of 230-235 million annual iPhone shipments. The analysts attribute this potential surge to several unprecedented factors in Apple's history, including an installed base of over 1.3 billion devices, extended replacement cycles averaging 4.8 years, and the limited compatibility of Apple Intelligence with only 8% of the current iPhone and iPad installed base.
The introduction of Apple Intelligence is expected to have far-reaching effects beyond iPhone sales. The technology's compatibility requirements are likely to drive a positive mix shift towards higher-end models, potentially increasing the average selling price (ASP) of iPhones. Additionally, with only 24% of current iPads capable of running Apple Intelligence, analysts foresee a mini upgrade cycle for iPad users as well.
Looking ahead, Morgan Stanley projects that in fiscal years 2025 and 2026, 66-69% of iPhones shipped will be new models, leading to a 4-5% annual growth in iPhone ASP. For iPads, the introduction of Apple Intelligence could reduce replacement cycles to 3.8 years, mirroring pre-COVID averages.
The outlook for Apple in China, a crucial market for the company, is also expected to improve. Despite losing market share in the high-end smartphone segment over the past year, recent quarters have shown signs of stabilization. Analysts believe that Apple Intelligence could drive strong upgrades in the Chinese market, potentially reversing the company's fortunes in the region.
With its stock reaching new heights and ambitious AI plans in motion, Apple seems poised to maintain its position as a dominant force in the tech industry for the foreseeable future.