Morgan Stanley Lowers Apple’s Price Target Amidst Delayed Siri Rollout and iPhone Shipment Estimates
Morgan Stanley analyst Erik Woodring has adjusted the firm’s outlook on Apple (AAPL), reducing its price target from $275 to $252 per share while maintaining an "Overweight" rating. This adjustment reflects a more cautious stance on Apple’s near-term prospects, primarily driven by the delayed rollout of a more advanced version of Siri. The analyst notes that this delay could limit Apple’s ability to accelerate iPhone upgrade rates in fiscal 2026, as the company will have fewer standout features to entice users to upgrade their devices. This shift in expectations has led Morgan Stanley to revise its iPhone shipment estimates for 2025 and 2026 downward by 1%-5%, now forecasting 230 million and 243 million units, respectively. Additionally, the firm anticipates a flatter replacement cycle curve for iPhones, indicating that the usual uptick in upgrades may not materialize as strongly as previously anticipated.
Impact of Delayed Siri Rollout on iPhone Upgrade Rates
The delayed introduction of an enhanced Siri platform is a key factor in Morgan Stanley’s revised estimates. Siri, Apple’s virtual assistant, has long been a cornerstone of the company’s ecosystem, integrating seamlessly with its hardware and software offerings. A more advanced version of Siri could have provided a significant incentive for users to upgrade their iPhones, particularly if it offered improved functionality, better integration with other Apple services, or unique features that enhanced the user experience. Without this catalyst, Apple may struggle to convince users that upgrading to a newer iPhone is necessary, especially if the incremental improvements in other areas, such as processor speed or camera technology, are perceived as modest. As a result, the analyst expects iPhone shipment volumes to grow at a slower pace than initially projected, with a more muted upgrade cycle in the coming years.
Revised iPhone Shipment Estimates and Financial Projections
Morgan Stanley’s reduced iPhone shipment estimates for 2025 and 2026 reflect the broader challenges Apple may face in maintaining its historical growth trajectory. The firm now expects iPhone shipments to reach 230 million units in 2025 and 243 million units in 2026, down from its previous forecasts. This modest growth reflects not only the impact of the delayed Siri rollout but also the potential for macroeconomic headwinds and increased competition in the smartphone market. Additionally, Morgan Stanley has factored in $2 billion of higher product input costs for 2025, largely due to China tariffs. While the firm assumes that Apple will mitigate most of these tariff-related costs through its global supply chain optimization efforts, the increased expenses still weigh on the company’s financial outlook. As a result, Morgan Stanley has lowered its fiscal 2026 revenue estimate to $436 billion and its earnings per share (EPS) forecast to $8, both of which are slightly below consensus estimates.
Flattening iPhone Replacement Cycle and Consumer Behavior
One of the more significant implications of Morgan Stanley’s revised outlook is the expectation of a flatter iPhone replacement cycle. Historically, Apple has benefited from a relatively predictable and short replacement cycle, with many users upgrading their iPhones every two to three years. However, recent trends suggest that this cycle may be lengthening, as consumers increasingly opt to hold onto their devices for longer periods. This shift in behavior could be driven by a combination of factors, including economic uncertainty, the rising cost of smartphones, and the perception that incremental improvements in newer iPhone models may not justify the cost of an upgrade. The delayed rollout of a more advanced Siri platform only exacerbates this challenge, as Apple may struggle to differentiate its newer devices in a way that resonates with consumers.
Mitigating Tariff-Related Costs and Supply Chain Resilience
While the delayed Siri rollout and softer iPhone demand are the primary drivers of Morgan Stanley’s revised estimates, the firm also highlights the potential impact of China tariffs on Apple’s financial performance. The $2 billion increase in product input costs for 2025 reflects the ongoing challenges posed by tariffs on goods imported from China, where Apple manufactures a significant portion of its products. However, Morgan Stanley remains optimistic about Apple’s ability to mitigate these costs through its well-established supply chain optimization strategies. These efforts may include diversifying production to other regions, renegotiating contracts with suppliers, and implementing cost-saving measures across its operations. While the tariffs do introduce some uncertainty into Apple’s financial outlook, the firm’s strong supply chain management and global footprint are expected to help cushion the impact.
Conclusion: A More Cautious Outlook for Apple
In summary, Morgan Stanley’s revised outlook for Apple reflects a more cautious view of the company’s near-term prospects, driven by the delayed rollout of an advanced Siri platform, a flatter iPhone replacement cycle, and the impact of China tariffs on product costs. While the firm maintains an "Overweight" rating on Apple’s shares, the lower price target and revised financial estimates suggest that the analyst believes the company will face significant challenges in driving growth over the next two years. iPhone shipment estimates have been reduced, and the expectations for fiscal 2026 have been adjusted downward, with revenue and EPS forecasts now slightly below consensus. Despite these headwinds, Apple’s strong brand loyalty, ecosystem integration, and operational resilience are expected to help the company navigate these challenges and maintain its position as a leader in the technology sector. Investors will likely be keeping a close eye on how Apple addresses these issues, particularly as the company prepares to unveil its next generation of products.
