Morgan Stanley Lowers Apple Price Target to $350

Morgan Stanley analyst Erik Woodring lowered the price target on Apple (NASDAQ: AAPL) to $350 (from $355) while maintaining an Overweight rating.

“Despite launching 2 fewer new iPhone models Y/Y and facing component constraints across 3 key product lines, Apple’s guided 8.5% Y/Y growth in the December quarter speaks to strength in Apple’s product portfolio and the benefits of pricing power, which we expect to persist – with revenue growth set to accelerate – through FY27 as more supply comes online and key products (iPhone 18 Base, Air 2, etc.) come to market.

However, Services growth decelerating further is an issue. Mgmt attributed the deceleration to App Store, 3P licensing (i.e.

GOOGL TAC) and FX, which should elevate concerns of possible AI disruption in key parts of Apple’s Services business.

We fully acknowledge that Apple has a number of tools/tailwinds at its disposal to offset these Services headwinds, but they likely take some time to materialize, meaning Services could decelerate in the March quarter again as compares get even tougher.

And while the December quarter gross margin guidance midpoint was 100bps below our expectation, we had modeled ~$1B of tariff refunds in the quarter that don’t appear to be materializing – after adjusting for that, the gross margin guide is nearly ‘as expected.’

Stepping back, we don’t believe tonight’s results will do much to shift the balance of power between Apple bears and bulls.

Bulls will point to Dec Q revenue upside, capex downside / strong FCF generation, and the persistent strength of Apple’s most critical product – the iPhone.

Bears will understandably point to the cont’d Services deceleration / agentic risk, memory cost headwinds, and a lack of real EPS revisions post-quarter.

Both perspectives bring truth, though we find ourselves leaning more in the constructive camp for now – albeit with relatively limited upside to our new $350 PT – as we believe the market is more likely to reward stability and cash flow predictability as it questions the broader AI trade.

Post earnings our FY27/CY27 EPS moves 5c/16c lower to $9.85/$10.00, which on an unchanged 35x multiple, drives our new $350 PT, and we remain OW-rated.”

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