Morgan Stanley has raised its iPhone sales forecast for Apple (AAPL.US) for the September quarter, upgrading the previous estimate of 50 million units (down 7% year-over-year) by 8% to 54 million units (flat year-over-year). The analyst team led by Erik Woodring attributed this adjustment to multiple positive factors: pent-up demand from extended iPhone replacement cycles, upcoming new model designs, and structural gross margin improvements - key factors that have continued to support their optimistic outlook since July last year.

The analysts emphasized that previously feared peak tariff risks (such as Section 232) have largely subsided, and regulatory impacts on short-term performance have been weaker than market expectations (though long-term risks remain). Additionally, Apple's pricing strategy is undervalued - its service prices have not been adjusted for two years, presenting future opportunities to unlock growth potential through this lever. Apple's current stock price trading level relative to the S&P 500 is essentially consistent with the average level of the past five years, providing valuation support.

Notably, this production revision primarily targets the iPhone 16 and Pro Max models, each adding 2 million units of capacity. However, Morgan Stanley noted that their internal forecast of 55 million units already partially incorporated this increase, running approximately 800,000 units higher than the revised 54 million unit prediction.

Looking ahead to the second half of 2025, analysts expect iPhone 17 series production to remain in the 80-85 million unit range, down 5% to 1% year-over-year (compared to 84 million units in the same period of 2024). They also pointed out that seasonal fluctuations in December quarter iPhone production are typically larger than in the September quarter, with sequential growth ranging from 35% to 71% over the past five years (excluding the special pandemic period of 2020-2021).

The team also observed that current market estimates for iPhone are showing an upward revision trend, and historically, Apple's stock price has often been accompanied by valuation expansion during estimate revision periods. Combined with channel inventory levels below normal and greater restocking potential in the September quarter, these factors collectively support their optimistic outlook for iPhone sales prospects.