Morgan Stanley predicts: Higher prices will actually boost demand for iPhone, not hurt it


The products are so good that they seem to be immune to the normal laws of economics.

On Tuesday, Morgan Stanley increased its 12-to 18-month price target on Apple to from $182 to $194, as the firm regards the higher prices as positive, not a negative like Wall Street’s other research firms.

“Innovation-led price increases historically boost, rather than hinder, Apple demand,” Katy Huberty, a Morgan Stanley analyst, wrote in Tuesday’s note to clients.

She further explains that “Apple is an aspirational brand offering high quality, innovative products at a premium price. As a result, the company escapes the typical trend of declining prices that drive demand for other devices. In fact, demand for iPhone is directly correlated to the direction of ASPs – higher prices, higher demand, and vice versa.”

Huberty’s new price forecast depicts 22% upside from Monday’s close. The stock of Apple is 0.6% higher in premarket trading.

Huberty increased her 2018 revenue forecast to $301 billion, 14% higher than the Wall Street consensus.

Morgan Stanley also regarded the extreme loyalty of Apple customers, which is displaying signs of rising from already great extents

“According to our April 2017 AlphaWise US Smartphone survey, Ninety-two percent of US iPhone users who plan to upgrade their phone in the next year plan to repurchase an iPhone, up from 86% the year before.”

Last week, Apple unveiled its latest lineup of iPhone, iPad, and Apple Watch technology, which all comes with shiny new price tags. The highly-anticipated iPhone X, which features the new face recognition technology in the most expensive smartphone of Apple yet, will be sold for $999, $50 more than the estimate of Morgan Stanley.

In part over the worries about the higher prices, the shares have dropped in the wake of the new product announcements.