How The iPhone 13 Is Driving Morgan Stanley's Apple Bull Case

Following a lackluster start to the year, Apple, Inc.'s (NASDAQ: AAPL) stock has risen over 20% since June, outpacing the S&P 500 by 16 points. A Morgan Stanley analyst detailed Thursday why they're bullish on the iPhone manufacturer's stock. 

The Apple Analyst: Katy Huberty maintained an Overweight rating on Apple and increased the price target from $162 to $166.

The Apple Takeaways: Three primary factors have driven Apple's recent gains, Huberty said. 

Over the last month, investors have shifted their focus to quality big tech names, causing Apple and its peers Alphabet, Inc. (NASDAQ: GOOGL), Amazon, Inc. (NASDAQ: AMZN), Facebook, Inc. (NASDAQ: FB), and Microsoft Corp. (NASDAQ: MSFT) to vastly outperform the broader market, the analyst said. 

App store growth accelerated in June both on a year-over-year and two-year stacked basis, "supporting the view of secular services growth," she said. 

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Supply chain data for the iPhone suggests an increase in output, negating the typically held belief that iPhone revenue drops during "S"-cycles, Huberty said. 

Despite Apple's recent outperformance, Morgan Stanley is bullish heading into the iPhone 13 launch in September, the analyst said.

The "combination of mature replacement cycles, increasing 5G adoption, improving retail store traffic, longer battery life and camera quality" will drive iPhone sales, contributing to additional share gains, she said.

Morgan Stanley forecast Apple's third-quarter revenue at $74.7 billion and raised its FY22 iPhone shipment forecasts from 231 million to 238.5 million units. 

AAPL Price Action: Apple shares were down 0.5% at $148.40 at last check Thursday. 

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Photo: the Apple iPhone. Courtesy of Apple.