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Morgan Stanley’s optimism is further buoyed by recent stability in iPhone production, which has shifted the focus toward recovery drivers such as service offerings, gross margin enhancements, and Edge AI capabilities. These factors are expected to contribute to market share gains and potentially reduce the time between iPhone upgrades for consumers.
The firm remains positive about Apple’s competitive edge in managing its App Store, even as it faces potential regulatory challenges in the EU that may require accommodation of third-party app stores. Moreover, ongoing legal scrutiny concerning Google (NASDAQ:GOOGL)’s agreements with Apple has not dampened the firm’s outlook.
Despite concerns over waning iPhone demand in China and lower retention rates compared to 2013, near-term risks related to production cuts seem minimal. Morgan Stanley suggests that the accelerated iPhone upgrade cycle driven by Edge AI technology could lead to substantial revenue increases beyond current forecasts.
As of December 2023, amidst these favorable conditions, Apple has once again achieved a market capitalization of $3 trillion.
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