Morgan Stanley projects that Apple may increase iPhone prices by approximately $200 this September, a move analysts estimate could boost earnings per share (EPS) by 2% to 4% for the third quarter of fiscal year 2026. According to the firm, this pricing strategy leverages the relatively inelastic demand for Apple’s flagship hardware, particularly among users who have historically shown limited sensitivity to cost increases.
The Case for Higher iPhone Pricing
Analysts at Morgan Stanley, led by Erik Woodring, maintain an “Overweight” rating on Apple (NASDAQ:AAPL) stock. In a recent research note, the firm argued that the market has not yet fully priced in the potential for higher hardware margins. The bank’s analysis suggests that Apple’s primary product lines—iPhone, Mac, and iPad—exhibit low price elasticity. The iPhone remains the most resilient product in the ecosystem, meaning a $200 price hike functions as a direct lever for profit expansion.
Supply chain checks reinforce this outlook. Morgan Stanley reports that production plans for the iPhone have remained largely unchanged in recent weeks. This indicates that contract manufacturers and component suppliers do not anticipate a demand drop-off following a potential price increase. Furthermore, the firm noted that competitors currently face supply constraints, leaving consumers with few viable alternatives to Apple’s flagship devices.
Did you know?
Morgan Stanley’s research indicates that the iPhone is the least price-elastic product in Apple’s entire ecosystem, followed by the Mac and the iPad. This hierarchy allows Apple to adjust pricing on its most frequently updated device with minimal risk to sales volume.
Catalysts for Growth: From AI to Foldables
Investors are looking toward three short-term triggers that could reshape market expectations for Apple. First, the upcoming release of June quarter results and September quarter guidance will serve as an immediate test of the firm’s pricing power. Second, the anticipated September launch of the iPhone 18 Pro, Pro Max, and the company’s first foldable model is expected to drive consumer interest. Finally, the public beta release of a redesigned, AI-integrated Siri will likely influence long-term sentiment.
Beyond the immediate horizon, Morgan Stanley sees a multi-year product cycle forming. The firm points to the 20th-anniversary iPhone range and the “iPhone Air 2” as key drivers that could sustain demand through fiscal years 2027 and 2028. This long-term roadmap, combined with an increasing focus on “Apple Intelligence,” forms the core of the firm’s bullish stance.
Maintaining Margins Amid Rising Costs
Apple’s strategy extends beyond the iPhone. Morgan Stanley observed that recent price increases across the Mac and iPad lines have not led to significant changes in delivery lead times. The bank interprets this as proof that the company is successfully passing on costs related to memory components to the consumer while preserving its profit margins.
Pro Tip:
When evaluating tech stocks during periods of hardware price hikes, monitor delivery lead times. Stable or lengthening lead times—as seen with Apple’s Mac and iPad—often indicate that demand remains strong despite higher retail prices.
Frequently Asked Questions
Why does Morgan Stanley expect Apple to raise prices by $200?
The firm believes Apple’s flagship products, especially the iPhone, have low price elasticity. Because consumers are less likely to abandon the ecosystem despite higher costs, a price increase acts as a nearly pure lever for increasing margins and EPS.
What impact will this have on Apple’s earnings?
Morgan Stanley estimates a 2% to 4% increase in EPS for the third quarter of fiscal year 2026, with a roughly 1% boost to EPS projections for the 2027 fiscal year.
Are competitors a threat to this pricing strategy?
According to Morgan Stanley, supply chain difficulties among Apple’s rivals mean there are fewer “credible alternatives” for consumers, which reduces the risk that higher prices will lead to a loss in sales volume.
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