Last-Minute Thought: Morgan Stanley Sets Expectations on Apple Stock Ahead of Earnings

Apple (NASDAQ:AAPL) is about to take its turn at the earnings plate, with fiscal second-quarter results due in less than an hour, coming right on the heels of the hyperscalers’ March-quarter reports.

In a way, it’s fitting that Apple’s earnings come slightly later than those of its peers. While the other tech giants have centered their strategies around heavy AI investment, Apple has so far pursued a different path, favoring a more “asset-light” approach. Nevertheless, AI progress will be one of the themes investors will be closely watching.

And of course, this will be the first earnings report since the company announced that Tim Cook will be stepping down from his role as CEO in September, making it another key area where investors will be looking for greater clarity.

Another development likely to draw attention is the impact of rising memory prices on margins. Here, Morgan Stanley’s Erik Woodring, an analyst ranked among the top 3% on Wall Street, anticipates that any downside in gross margins will be compensated by a stronger June-quarter revenue guide. This could drive results above the market’s more cautious stance, serving as a “potential clearing event” ahead of WWDC in June and the iPhone launch in September.

“Although our gross margin outlook remains below consensus due to increasing memory cost pressures, ongoing strength across iPhone, Mac, and Services revenue is expected to offset this impact, leading to an implied June quarter EPS guide broadly in line with Street estimates of around $1.74, which would come in better than feared given the relatively subdued expectations,” the 5-star analyst expounded on the issue.

Woodring thinks this setup could help reset Apple’s narrative into a seasonally strong stretch, supported by solid revenue growth of about 15% per quarter through FY27, driven by various market share gains, a historically favorable period tied to estimate revisions and multiple expansion ahead of a new iPhone launch, and several upcoming catalysts. These include a low-expectations WWDC that could benefit sentiment if Siri sees a meaningful upgrade, as well as a fall iPhone launch that introduces “genuine new product excitement (i.e., iPhone Fold).” At the same time, Apple’s strong free cash flow stands out against rising megacap capex.

At roughly 28x next year’s GAAP EPS, valuation sits near the midpoint of its historical range, and with FY27 EPS projected at around $10, about 5% above consensus, Woodring sees a path toward a share price of $300 by September, boosted by “modest multiple expansion and more robust positive EPS revisions.”

There are, however, risks to consider here. These include higher-than-expected memory costs, a lack of pricing increases with the iPhone 18, unusual second-half seasonality due to a staggered launch, and potential demand weakness if pricing or macro conditions weigh on consumers.

“Taken together,” Woodring summed up, “these risks keep Apple from being our Top Pick today, but they do not outweigh what we see as an increasingly attractive long setup into the September iPhone launch.”

To this end, Woodring assigns AAPL shares an Overweight (i.e., Buy) rating alongside a $315 price target, implying the stock will post one-year returns of 16.5%. (To watch Woodring’s track record, click here)

16 other analysts are also AAPL bulls, while an additional 9 Holds and 1 Sell all add up to a Moderate Buy consensus view. The forecast calls for a 12-month share appreciation of 9%, considering the average target clocks in at $299.80. (See AAPL stock forecast)

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.